Finding an angel investor for your small business

One of the ways that you can secure financing for your small business, is to find an angel investor. Angel investors are often willing to invest in small businesses that traditional lenders have passed on. Although the figures vary widely, angel investors are believed to provide billions of dollars in capital to entrepreneurs every year. Based on demographic studies angels are typically:

• Individuals with at least net worth of over $1 million dollars
• They are usually self-made as opposed to inherited wealth
• They are usually in their sixties; almost never below forty

Angel investors typically prefer to invest in industries that they are familiar with. They usually seek out small and growing companies in their field of expertise. If you have decided that pursuing one is right for you, here is what you should know about finding an angel investor for your small business-

• Start with the people around you-The first place to start looking for an angel investor is among your business associates. This is because you have a greater chance of securing financing, from people who already know you. You should keep in mind that the farther the relationship, and the lesser the prospective angel knows you, the lesser the chances of securing the investment, unless they have a unique understanding of your product.
• Focus on networking-You can do easier by joining a professional organization or trade group, for your industry. You should begin attending meetings on a regular basis. This is the best way to get acquainted with successful business owners in your field.
• Look close to home-You need to stay local. Angel investors typically like to invest in businesses that they can keep a close eye on. This means that you don't need to go beyond your geographic area, to find investors willing to take their chances with your venture.
• Ask the professionals who help you run your business-You can discreetly inquire about people who appear to be the most successful members of your industry. Be sure to talk to your lawyer or accountant (they may be interested or know someone who could be interested). They may also have clients who frequently invest in a new and growing business.
• Research on the Internet-There are some sites on the web that will provide listings of angel investors, per geographical location, while others provide focused advice on getting investors for your small business.
• Budget the time and the money you need to find an angel investor-One of the basic rules of financing is to always raise money at the right time. Convincing angels (or anyone else) to part with their cash to support your business, can take a lot of time and hard work. You need to be sure to dedicate enough time and money in your search for financing.
• Have a well-written and well-thought business plan-It is important to remember that your angel investor may be getting hundreds of proposals a month. You must be able to show why your company stands out from everyone else. While you may think that your company is extra special and worth financing, your job is to convince the angel investor of that fact.
• Understand what angel investors want-Angel investors may prefer to make straight loans at rates that are comparable to banks or slightly higher rate. Keep in mind that they generally expect to lend their money from three to seven years, with some guaranteed exit provisions such as mandatory buy-out. Others may want to be repaid in stock if your company eventually goes public. You will need to be sure to tailor the financial arrangements to fit your angel's needs.

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