Everyone is looking for an angel… So what are angel investors? Many see them as the saviors of small businesses seeking investment. However, that may not always be the case. Angel investors are just what the later part of the name implies, they are investors! When a business accepts funding or investment from an “Angel” there are often many strings attached.
The least of which is a long term ownership interest that never goes away. While angel investors and angel investments may appear to be a panacea for small business, they can also mean that entrepreneurs have opened the door to be micro-managed by someone who doesn’t understand their business.
Angel Investment vs Working Capital Investment
As angel investment comes into a company, the angel investor will want to be repaid at some point in the future. A constant drive for profits, growth and eventual repayment of their principal amount plus a return requirement is often the goal. Once repaid, the ‘angel’ still lingers in your business and that can be frustrating.
Let’s talk about working capital investment. Working capital is a loan, albeit one that requires rapid repayment, but a loan nonetheless. With working capital investment there is nobody standing over your shoulder demanding you run your business a certain way and with working capital investment, once you’ve repaid the loan, the investor is gone!
Working capital investment is a loan but it is cost about the same in terms of rate and return to the investor as an angel investment. Angel investors typically seek about 20-25% or higher returns on their investments. In some cases, working capital investment achieves the same goals for the same return or lower and with less ‘back-seat-driving’ and ownership hassles.
The next time a small business thinks about seeking an Angel Investors, it might behoove them to rethink that strategy and settle for a working capital investment. Working capital investments set up like loans have fast repayment periods and no share ownership hassles!
For more information on working capital investments call the experts at FastLoans to see how we can get you the investment you need … FAST!
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