Investment capital always comes at a very high price as you need to provide a substantial amount of equity to your investor as your small business carries higher risk than you think. Successful businesses are founded by executing on solid business plans targeted at significant market opportunities. When you are developing a business plan for an angel investor or private funding source then it is important to include some other than obvious ideas in your market analysis, perhaps connecting needs from related markets. Due to the economic recession, most angel investors are seeking to obtain low risk investments that generate highly recurring streams of income, and as such, you should look into royalty based financing and other lower cost financing models It should be noted that there are many risks associated with selling a portion of your business to a third party angel investor, which we are going to continue to discuss throughout this series of articles.
As it relates to debt financing, the financial contribution of the SBA comes in the form of loan guarantees. It is important to note that the vast majority of businesses will never have the potential to go public, and as such, you are going to need to have a substantial amount of private investment from time to time. Areas such as corporate organization, debt instrument review, competitive analysis, and identification of major risks will be analyzed during the due diligence process of working with the SBA or angel investor when you are raising capita for your business.
It is quite likely that a profitable, growing business will have a negative cash flow in its early years. It may be helpful for you to search for any free business plan training that may be available to you as you progress through the business planning process as it relates to raising capital. Once they have approved your business proposal, an angel investment group will begin to negotiate with you as it relates to how much capital you will need to sell as it relates to the capital that you are seeking. Businesses that are economically you can use some recessions, such as medical businesses, particularly popular among angel investors, and you will be able to sell a smaller portion of your business than with a high risk business.
As of 2011, the SBA had more than 70 district offices and numerous branch offices throughout the United States. Small Business Administration loans are a great alternative to selling equity to an angel investor. As always, you need to examine each possibility as it relates to obtaining outside capital for your business.