Sometimes small business owners are in dire need of a quick investment to help them boost their expansion or profits. However, not everyone knows that instead of applying for a loan or becoming a debtor, you can also ask an angel investor for financial aid. Below are three pros and three cons of angel investment.
1. There Is A Huge Possibility Of Them Taking The Threat Of Your Prospects
Sometimes is can be extremely difficult to be able to meet the requirements of a small business loan. Since you cannot raise capital by merely issuing shares. Many options that may be directed your way may also not be futile, because of the potential risk. Angel investors, however, don’t just look at the risk, they look more at the potential the business has in the future. They can help out if you can give some stake in the business as an owner – normally the amount is more than 10%.
2. Angel Investors Do Not Issue Debts
Luckily, an investment with an angel does not mean you will have to pay back with interest once the investment has been made. However, you will need to give the angel investor a stake in the business as an owner. This way you will be getting an investment and they will be securing their funds. This way you are not under monthly debt payments that will damper your profits heavily.
3. Your Business Has A Better Opportunity To Find Success
The best part of having an angel investor is that they will be dynamically taking part in your business’s operations. This benefits you by being able to pick at their experienced brain and you will be able to develop your business into a much stronger brand. They have a knack for making businesses healthy again, by helping them grow, being vivaciously active, and able retrieve a solid rate of return. You don’t just receive an angel investor, you also receive a mentor.
4. There Is A Price For Taking A Risk
Once an angel investor gains a certain amount of control of the business, they, like any other investor like to see a healthy return on their investment. They will set the benchmarks, and they will expect you and your business to perform accordingly. This can be very overwhelming since you will be given five years to produce a solid return. The stress levels for small business owners can be high.
5. There Will Be Some Loss Of Control
Everything comes with a price. If you give hefty funds to someone, you will want to have a little control over it to see what you will get in return. Much like getting served food at a restaurant, if you receive poor service you will not be happy. This is much how an angel investor feels, that is why they feel the need to take part in the decision-making process. Whether the angel is a silent investor, they will expect for you to be answerable for your actions.
6. Their Best Interest May Not Be A Mutual Feeling
There have been many times where an angel investor has been misleading about the intentions they have of someone’s business. They might not be patient, and want you to show them the money, they will not guide you nor mentor you, and their focus is mainly on their selfish claims. It really depends on how you want to run your business with due diligence and make sure that they are holding up to their end of the bargain. You could hire a finance attorney that excels in such an assignment writing service for contracts to solidify the angel investor’s diligence.
Catherine Daisy is a Financial Analyst at a well-known investment company. She takes up blogging as a way to educate novice entrepreneurs, investors and businesspersons about the various facets of financial investment. She also serves students and professionals with assignment writing service.