March 21st, 2013
By Bill Morrow, Founder Angels Den
Raising capital for your business can take many different forms and it is important to secure the right funding for the right business. Your company size will affect which business funding solution is right for you, for example what works for an SME won’t necessarily work for a big corporate company.
With little recovery for the economy in the last year, many small businesses are still struggling to find the funding they need. Here are some of Angels Den top tips for financing your small business.
- Forward profit generation involves using your generated profit to grow the business. This is the safest way of funding your business as it doesn’t involve borrowing, however your expansion is limited and any salary you pay yourself will be very small. It may be possible to live off any savings you may have whilst not drawing a salary from the business.
- Many people use their redundancy payment to fund their business. Again, with this method your expansion will be limited.
- Borrowing from friends and family is a much used option, however you need to consider what will happen if the business fails, and how that may affect your personal relationships.
- Bank loans and credit cards are still popular ways of financing a business. The credit card represents one of the fastest ways to get funding, however you need to watch out for crippling interest charges. Bank loans could be either a personal or business loan , and enable you to borrow larger sums of money, however most require you to put up a form of personal security i.e. your home or business premises.
- A Business Angel is someone who invests money in a business in return for a shareholding in that business. They may invest as an individual, or as part of a group of investors. Although they will expect a stake in your business in return for their investment, as well as providing capital investment, Business Angels can offer valuable experience that can be integral to the success of growing a business.
You may have decided that you do not feel comfortable with securing more debt against your company’s assets, you are unwilling to take on more personal debt via a re-mortgage or credit card or you may have invested all of your, or your family’s, savings. Raising Angel Capital really doesn’t have to be a painstaking process and is a very quick way of securing finance for your business, without you risking losing your house through re-mortgaging or running up sky-high debts!
If you’re considering approaching Angel Investors in order to get the cash injection you need to start or grow your business, you might want to first ask yourself ‘Is the business investment-ready?’
It is important to ensure that as an entrepreneur or business owner, every aspect has been carefully thought about.
- Are your financial forecasts realistic?
- Do you know your market?
- Have you researched enough?
- What is your strategy for the future?
With so many points to cover, it’s easy to miss something that may seem trivial but could be a deal breaker for a potential investor, so it’s worth getting as much impartial advice about your business plan or start up idea as possible.
Without the support of a Business Angel Network, such as Angels Den, it can be incredibly difficult to raise the Angel Investment in such a short time unless you are incredibly well connected. A Business Angel Network speeds up the process to make it a much more straight forward and enjoyable experience, as well as offering advice and supporting you through the process.
In the current economic climate, many businesses have turned to angel finance and found it ready, willing and able to help them raise the capital they are looking for, quickly and easily.
Serial entrepreneur, Bill Morrow, has been creating, building and selling businesses for the last 25 years. He is founder and CEO of Angels Den, Europe and Asia’s largest equity funding facilitators, operating at the heart of entrepreneurship to bring business Angels and entrepreneurs together.
Angels Den connects business owners that need funding with Angel Investors (High Net Worth individuals) and provides a fast-track to business funding. If you want to find funding fast or are keen to invest, take a look at our website or get in touch with one of our Regional Managers who are waiting to help you.