One of the most important things that you need to understand when you are working with an angel investor is that you are going to need to sell a portion of your business. There are very few circumstances in which a private investor will provide you with a loan. However, this is not always the case. One of the best ways that you can sweeten the deal for an angel investor is to split the investment between an equity sale as well as a loan. This is starting to become a common practice as many outside funding sources, especially smaller ones, want to ensure that they are able to generate a highly recurring stream of revenue which acts as a security for their total investment. We are going to continue to focus on using debt equity hybrid investment models when you are seeking capital from a private investor.

If you are a business that is already in operation then the negotiations with an angel investor will be much easier. This is because you have something to offer that has a tangible value. If you are starting a new business then you will be in a much more difficult position when it comes to the deals of your investment agreement. The risks involved with a new business are substantially higher than those of an established company. On a side note, we always recommend that you work closely with an attorney throughout this part of the capital raising process. This is due to the fact that there are going to be a number of contracts, disclosures, promissory notes, and other documents that need to be reviewed by a qualified attorney. In most circumstances, a lawyer that specializes in small business transactions can review this documentation appropriately.

 

When you are making a deal with an angel investor, the best thing to showcase to this outside funding source is the potential return on their investment. This is going to be the primary issue they are concerned with as it relates to putting capital into your business. The other issue that you are going to need to deal with is that an angel investor may want a certain level of control over your business as it relates to the day to day operations of your venture. These details should have a substantial focus in the investment documentation that both you and an angel investor will need to sign.

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