Angel investors are private individuals who lend money to businesses and non profit organizations. In return for the cash angel investors receive debt notes in the business or a share of the ownership. The debt or ownership is negotiated between angel investors and borrowers. There are no uniform lending requirements among angel investors; these can vary from lender to lender.
Type of Businesses for Angel Investors Funding
Any type of business exhibiting growth potential can receive funding from private or angel investors. Some of the more popular businesses include real estate, restaurants and internet start up companies. According to the Angel Capital Association, Angel investors like to fund start ups or companies in the early development stages. In addition to money, private investors may introduce the borrower to a valuable network of clients. Some of these clients may also be receiving funds from the same angel groups.
Angel Investors Fees
The cost to borrow money from private or angel investors can be expensive. These investors take on a lot of business risks, much more than traditional banks. Many of the early start up or early stage companies go bankrupt within a few years, leaving investors empty handed. Businesses borrowing from private investors should be ready to pay interest rates in the low to double digits percentages.
How to Find Angel Investors
Private investors have grown in popularity and can be found in many large cities and business hubs. Individuals looking for angel funding should perform due diligence research on how to approach these investors. There are some not for profit associations and groups providing education, networking and information on angel capital. These are some ideas on finding private investors.
- Angel Capital Association – this is a not for profit organization offering education, research, data and other information to angel investors and to businesses looking for funding. The association has many partners who also fund business ideas and projects.
- Business universities - schools hosting small business labs or entrepreneurship studies often have contact with angel investors. These universities may offer grants to small business, private investors are willing to fund them. The head of the business department or the person running the labs may have a list of these investors and the type of projects they funded in the past.
- Angel investor networks and venture capitalists hubs – Many of these groups operate on the internet, some are national others regionally oriented. The business is required to submit plans and other financial information to the group. The main advantage of using these networks is that requests can be seen by different investors at once. Examples of these groups include: Network for Business Angel Investors, New Jersey Angels, Tech Valley Angel Network and Walnuts Venture Associates.
- Angel Investors events and summits – Networking events put together by private investors groups and associations to bring together investors and businesses under one roof. Most of these events take place in large cities.
Read on Other Lending and Money Sources
Find Money from Private Investors
Writing Personal Money Loan Agreements
Free Money Search from the government
Resources: Public Information at the Angel Capital Association website, current as of March 29, 2010.
Sylvia Cruz - Sylvia holds Bachelor and Master degrees in Business Administration with majors in Finance and Accounting. She is also a CIA - Certified ...
