Business Headlines
| Angel Investors " not Always the Best Alternative. |
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| Written by Wade Henderson | |||||||
| Sunday, 22 March 2009 09:31 | |||||||
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No one has to tell a business owner that getting access to much needed cash flow is a difficult task today. It matter not if you are in Canada or the United States, if you have gone to the bank to inquire about financing, there is a good chance you were turned away. For this reason many companies turned to Angel Investors for that all important cash injection.
No one has to tell a business owner that getting access to much needed cash flow is a difficult task today. It matter not if you are in Canada or the United States, if you have gone to the bank to inquire about financing, there is a good chance you were turned away. For this reason many companies turned to Angel Investors for that all important cash injection. Be aware that Angel Investors typically look for a ROI of 5 " 10 times their investment in under 5 years. This is accomplished by looking at many aspects including the salvage value of your company. They will create an exit strategy to recover the funds from your company in the predetermined time frame regardless of consequences to your company. 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%. Because of this high return on investment, Angel Financing is very expensive, but the lesser costing funds such as banks and credit unions are rarely available for new business start-ups. This is because the traditional financiers have a high threshold for accepting young companies for Business Loans. 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? It is irrelevant if you are in Canada or the United States, the story is the samebut there are options. This is a real life deal that I just completed recently. It is a Distribution company in Alberta Canada that had a unique product that it wanted to market throughout North America. The owner went to the usual banking institutions and was denied the loan. He then spoke to a few Angel Investors who gave him proposals which he did ponder over but shortly after continued to search for options. When I spoke with him I suggested a combination Accounts Receivable Factoring and Purchase Order Finance facility. 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 stockbut 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 is a recognized Professional in the Commercial Lending Industry with over 13 years Experience in the Business Finance Field and a strong reputation for getting the deal done. Visit his Commercial Finance Website to put his experience to work for you. Grab a totally unique version of this article from the Uber Article Directory
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