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Should You Be Dealing With Angel Investors?
Getting a Business loan at your bank is a terribly difficult task these days regardless if you are in Canada or the United States. Because of this many businesses feel they need to seek the operating cash they need from Angel Investors. But are you ready to turn your business over to an Angel Investor?
Be aware that Angel Investors typically look for a ROI of 5 " 10 times their investment in under 5 years. This is accomplished by looking at many aspects including the salvage value of your company. They will create an exit strategy to recover the funds from your company in the predetermined time frame regardless of consequences to your company.
Due to the current market conditions in our economy Angel Investors are looking for higher than a 10 times ROI. This is because of all the business failures versus the successful ones. When you consider the failure rate in the Angel Investor portfolio, the effective ROI for a successful Angel Investor is about 20% to 30%.
Since the ROI for and Angel Investment is so high but the lower costing financing at the credit union and banks are not available, especially for business start-ups it makes being in business even more difficult. The reason the banks and credit unions are not interested in financing start-ups is because they lack the history and asset backing required by their underwriting guidelines.
So if you can not get a loan at the bank and Angel Investors are too expensive, what is the answer?
Reality is it does not matter if you are in Canada or the United States you do have options. Here I will give you a real example of a business that found the best option. There is a company in Alberta Canada that was looking to expand throughout North America with their product. The owner of the company went to the usual channels to get Commercial Financing. After he was turned down by the banks he the spoke to some Angel Investors and received proposals. After considering what was at steak by accepting the proposals he decided to continue looking for options. This is when he and I met over the internet and I presented him with options he had never considered, nor heard of for that matter. Accounts Receivable Factoring and Purchase Order Finance.
When I had initially spoken to the owner of the company, he had shipped out one large order and was about to ship out his second large order which was going to wipe out his entire inventory and he would have to wait to receive payment from the customers before he could replenish his stock but he had several additional orders to be filled and he had no way to fill them without cash.
After I received the application from him it was about a week when he received his first advance on his new Line of Credit using Accounts Receivable Factoring and now he has the cash to make his business run more smoothly.
In short, if your company has been turned down by the banks and credit unions plus there is no comfort for you in dealing with an Angel Investor due to their terms, be sure to check with a Professional Commercial Finance Broker so they can put together the proper financing for your business.
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