Angel Investor Basics

What Is Angel Investing?

Angel investors are generally a group of professionals – attorneys, doctors, CEOs, former business partners and seasoned entrepreneurs – that come together to help the next generation of business folks. The good thing about these folks is they are generally financially well off and don’t mind invest money into a person’s business as long as they get into the action.

How Does Angel Investing Work?

In order for angels to become accredited investors, they must meet the definition set forth by the Securities Exchange Commission (or SEC, for short). Potential angels must have a $1 million net worth and make a minimum of $200,000 a year ($300,000 a year with spouse).

Angel investors will provide entrepreneurs with money, which, in turn, you’re giving them company equity. Angel investments typically go for approximately $600,000.  With the increase number of angel groups, there are many investors involved in the majority of the investment rounds.

Positive Aspect: These investments are great for already established businesses; ones beyond the initial start up phase; but are still in their infancy that they must have capital for their marketing strategy or create a product.

A good number of businesses that get help from the angel investments have some revenue but still need cash to increase its brand awareness. Angel investors can give this to business owners and become an integral part of the business.  Since it’s their money going into the business, they’ll do whatever they can to see you succeed.

Negative Aspect: It’s possible that you’ll put up to 50 percent of the business at stake. And, it’s possible the investors will see you as the being the reason your business isn’t succeeding, firing you from it.

Think of angel investors as venture capitalists – they want to see a light at the end of the tunnel that gives them a return on their investments.  Therefore, you may need to give up the business before you’re through with it yourself.

How Can You Get An Angel Investment?

There was a time that angel investors were rich people business owners knew. Or, they were seasoned entrepreneurs who were found using the local Chamber of Commerce, Small Business Development Center, or a highly respected and trusted accountant, attorney or banker.

Today, however, angel investors are thriving and multiplying, giving lots of advice and mentoring along with providing them money.

Using Credit Cards to Finance Your New Business

Credit cards can easily supply small, growing businesses easy money. But some very serious risks also come with them.

There are personal credit cards, and there are cards custom made for small companies. Each one has rewards and benefits. There is more protection provided by the government for people who own personal credit cards, while business cards could have increased limits and rewards like office supplies that are affordable and custom made for owners of businesses.

Don’t get fooled into thinking you should make use of a business card with the business, because no matter what, you’ll damage your personal finances if the bills fail to get paid.

The Upside

In addition to giving required money to new businesses, credit cards may also increase credit scores for business owners and businesses both , which will depend on if payments are made promptly. In addition, there are exclusive perks and rewards like gas that’s available at discounted charges, cash, and even airline miles.

The money is also a whole lot easier to come across, which will certainly aid you in a pinch.

When it comes to record keeping business owners may get the assistance they require by using business credit cards for daily costs in the business, which will help them separate personal and business finances, make business financial reports, and keep close track of personnel spending.

The Downside

Credit card interest rates are way higher than old fashioned loans, which may make them a costly type of debt that will hurt the business during difficult times.

It’s no wonder that for each $1,000 in credit card debt that a small company takes on, it’s chances of lasting for an extended time period reduces by more than 2%, which was discovered by the Ewing Marion Kauffman Foundation.

For a new company, it is important to tap personal funds, friends, family and other investors to stay away from gathering up a lot of credit card debt. The earnings of a young business will become swallowed up by such high interest debt.

Getting behind on payments and you’ll probably mess up your credit score, making your chances to take out loans as the company grows slim. An overdue payment on a small company credit card also will get you reported to a business credit agency.

Additional Tips

Here are some additional tips for using credit cards to finance your new business:

• Go and visit review websites including CreditCards.com, CardRatings.com, and Bankrate.com that hand out online tools to examine rewards programs, interest rates, and annual fees.
• If you do not closely examine the fine print and ask a lot of questions you might get burned on a small business credit card. Such cards aren’t protected by the 2009 Credit Card Accountability, Responsibility and Disclosure Act. As arbitrary interest rate improves the law keeps customers safe from such tactics.
• It may be much better to charge purchases on the personal plastic rather than a business card if you think you will not have the ability to pay them off in just one billing period.
• Avoid paying too much attention to annual charges. Take a look at employee expense tracking, concierge service, baggage insurance, and also having access to airline clubs.
• Try to find the business cards that have the most impressive rewards to make something back on the business’ purchases.
• Utilize introductory zero-percent rates on both balance transfers and purchases.
• For different kinds of transactions you should make use of different kinds of cards. A business-rewards credit card for example, will most likely be good for daily charges, while a zero-interest personal card will likely be good for funding.