RAISING CAPITAL THROUGH BUSINESS ANGELS VS BANKS
If you’re looking to raise capital for your business, you’re probably considering one of 2 options – investment through (e.g.) business angels, or financing through banks. But which do you go for?
Business angels and other investors can bring a whole host of advantages to a business. Not only do they provide capital, but because they’re successful entrepreneurs in their own right they can bring a wealth of knowledge and expertise.
This experience can be vital to the success of a business. It’s no good having the capital there if you don’t know what to do next. And, because their investment is offered in exchange for a share in the business, they’re more motivated to help it succeed to ensure their return.
Banks, on the other hand, offer loans rather than investments. They get their return through interest, and will often hold you to strict timescales for repayment. They usually can’t offer the same level of financing that an angel investor can, and won’t bring the same amount of help and support to a business.
You’re also more likely to be turned down for a loan from a bank. They often require security, and if you’re a start-up it’s unlikely that you’ll have any to offer. They’re also unlikely to invest in more unusual business ideas, or ones that are risky.
This isn’t the case for business angels. They’re attracted to businesses that are high-risk, as it’s these that have the most potential for growth and, subsequently, profit. They get their returns depending on the profitability of a business, so as long as a business has potential for growth they’ll consider investing in it.
Banks will always have their own interests at heart. Business angels, on the other hand, consider your interests as well – you’re both working for the success of the same company so it’s essential that you have the same vision and priorities.
As you can see, raising capital through business angels is a far better option than going for banks. They offer more money, more support, more time, and ultimately more success. What’s there to think about?
About the Author:One of the best websites in this regard is entrepreneurinvestornetwork.com.au, which aims at uniting angel investors looking for business investments in Australia with budding entrepreneurs in the country.Log on to the website today. You will not be disappointed.
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