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Are You Ready To Turn Your Business Over To Angel Investors?
Today getting a small business loan is a daunting task at best " regardless if you are in the United States or Canada. Many businesses look to Angel Investors for the much needed cash injections the banks had turned them away for. But is this the Best Alternative?
Angel Investors look at deals differently than banks, or most other lenders for that matter. Their focus is to net between 5 and 10 times their initial investment in a period not to exceed 5 years. They do this by carefully plotting their exit strategy to recover their funds within the specific time period they define which can take the form of public offerings of stock, takeover or liquidating the assets of the company. What ever it takes.
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.
At this point, you have been turned down by the banks and credit unions plus the Angel Investor proposal does not look very attractive, so what do you do now?
Regardless if your company is in the United States or Canada, there are options. The following is a real life situation that I was involved in to avert an Angel Investor situation. There is a company in Alberta Canada that possesses a unique product that he was planning to market across North America. He went to the usual places to inquire about financing for his business. After the banks turned him away, he spoke to a few Angel Investors. After considering their proposals he continued his search for financing when I presented him with an option called 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.
In a matter of 7 days after the application was returned to me he was ready to fund and now has access to the much needed cash he needs to grow his business.
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.
About the Author Wade Henderson - recognized Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com IMM Project Finance IMM Leasing
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