Private Investors

Private investors often take on extremely high risk and usually need to charge a high interest rate to cover expected future losses on investments.  A significant portion of Angel or Private Investments are lost partially or totally so the risk versus reward needs to be managed closely by these investors.  It’s not all that uncommon for angel investments to be lost completely when early stage companies fail which requires professional angel and private investors seek investments that have the potential to return at least 10 or more times their original investment within 5 years.

Most private investors put together the exit strategy within the loan structure up front so both parties clearly know the exit if things go south and the exit if the investment is a success.  Current market conditions suggest that angels and private investors might do set yield projections even higher, looking for companies that will have at least the potential to provide a 20x-30x return over a five year period. Since these investor's need a very high rate of return on any given investment it can make angel & private financing an expensive source of funds.  Cheaper sources of capital should be checked out and researched before deciding to use private or angel investors.  Other forms of funding such as bank financing, are normally not available for most early-stage companies, as no solid credit criteria exist for approval.  It’s these situations that make private & angel investors a possible solution.

Who Qualifies for Private Investors

 

You will need a strong background in the industry that you’re looking to raise capital.  Most private & angel investors are entrepreneurs themselves so they understand that to be successful you need to know and understand want your proposing to do.  Strong and detailed business plans with actual formal projections in a professional format.  The principals of the business will also need to have decent personal credit.  No private or angel investor will put funds at risk without a good look into the future as they need to understand the risk and reward of the investment.  If your in need of capital to make your business achieve goals and grow private investors could provide a good option if you have a solid business plan that details future revenue and potential risk.

The businessfinanceapp.com portal has multiple private and angel investors ready to evaluate opportunities and investments.  These can be structured as loans and often require an equity kicker as an incentive to the investor or a joint venture arrangement.  When you’re considering this kind of funding solution keep in mind your likely going to give up a portion of your company.  If you’re not willing to do this then you should look at other options that do not include equity kickers or joint ventures.  Some of these would include contract financing, purchase order financing, cash flow lenders, inventory lenders, and perhaps invoice factoring.  All of these funding solutions typically do not require strong financials and they will consider looking at the future of the business rather than the current situation to make a loan decision.

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