The market for your business is more promising if people have already shown an interest in potentially providing you with capital for your business. The businesses that are most sought after by angel investors are those that carry a low risk by a relatively high rate of return. As such, and within your business plan, you should heavily focus on how you intend to use the funds provided by your private investor while also showcasing the return on investment as it relates to your business
Individual investors typically have a number of different financial needs, and you may need to negotiate individually with these funding sources unless you decide to aggregate the investment through a private placement memorandum. As we have stated before, it is imperative that you understand that most angel investors do not make loans. As with all financing, you should discuss every option available to you with a certified public accountant or business adviser so that you can ensure that selling a portion of your business to a third party is in your best interest. Additionally, your business adviser will be able to provide you with the necessary information as it relates to marketing your business to potential angel investors or other third party funding sources
You cannot simply take out an advertisement as it relates to raising capital from a third party. There are a myriad of securities laws in place to ensure that investors are protected from fraudulent schemes. As such, you may want to consider hiring a private placement broker or capital introduction firm that can appropriately assist you with obtaining the financing that you need while conforming to all applicable securities laws.
One of the primary disadvantages regarding working with an angel investor or private placement broker is that the fees are extremely high. As such, you should take into account the cost of investment capital that that you will be acquiring from these private sources. However, these fees are typically only collected if the capital introduction firm or private placement broker is successful is being able to place angel investment capital with your business while concurrently remaining within the letter of the law as it relates to marketing your business to third party investors.
As we always mention throughout our articles, it is extremely important that you work with a number of professionals as your progress through the capital raising process to not only ensure that you are operating within the appropriate legal framework but also so that you get the best deal possible as it relates to your capital raising activities.