Investor Options

Guest post by: Ilya Bodner

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Investor Options

Raising capital is never easy. Conventional financing options are running thin and banks close their doors to a lot of lending right now. However, within conventional financing methods exists an arena of creative financing. A business owner may choose to find an investor or an investment group that does not necessarily play by the common rules. There are a few choices that exist; most want to dominate an upcoming market or simply want hefty profits in a short time. Below are the three fundamental types: Venture capitalists are lenders that have relatively high standards for loaning money to small businesses. Generally, venture capitalists shy away from start-up businesses less than a few million dollars in verifiable potential, unless the owner has a history of successful start-ups. Venture capitalists (VC's) tend to focus financing on high-tech companies. They expect a company they fund to have experienced and diverse management that will drive a fast-paced growth model. Venture capitalists expect a very high return on their investment. Often venture capital can be found through a network of brokers, investors, underwriting groups, private equity firms, and banks.

Angel investors are usually wealthy individuals or business people who make high-risk, potentially high-yield investments in start-up companies or small businesses who are looking to expand their market opportunities. Angel investors typically focus on companies that have already developed a basic concept and business strategy, and are in the seed stage of investment. An emphasis is placed on business enterprises with the potential for rapid growth. In addition to offering significant capital to launch business entities, many angel investors also offer their business expertise and actively participate in the management, operation, and marketing of the business.

Hard-money lenders are essentially private lenders other than banks and other financial entities. Hard-money loans are typically offered to borrowers who do not qualify for traditional mortgages and financing through banks and financial institutions, or choose not to take out bank notes. They may also be utilized by people or businesses that are looking to close quickly or are unable to provide sufficient documentation, as some underwriting criteria is extremely rigorous. Hard-money lenders are generally more willing to take on risks, but typically charge higher interest rates than traditional notes. An advantage of hard-money loans includes the ability to negotiate the interest rate and other terms and conditions in favor of the borrower. Money-saving opportunity derives from elimination of title insurance premiums and legal fees normally charged by traditional lenders. In addition, the closing time is generally shorter because the borrower does not have to wait for multi-level approvals.

The sources of commercial hard-money loans are usually private individuals, mortgage companies, federal banks and SBA lenders. Each individual lender has its own benefits and downfalls, so you'll want to research as many different lenders as possible before making your final decision.

About the Author: Ilya Bodner RSS for Ilya's articles - Visit Ilya's website Over the course of the last 10 years as an entreprenuer I have successfully launched, managed, and sold off several businesses. Each organization has added some value to my understanding of the business world today. My philosophy has been that 9 things out of 10 that I try will fail, but that golden one is always worth the battle. In my experience that has proven to be the case and my successful businesses still operate today under the management of those whom I have sold off to. Click here to visit Ilya's website More from Ilya Bodner GOING TO WORK VS COMING TO A PLACE OF BUSINESS Have The Answers TURNING CHAOS INTO ORDER Strong Business Credit Competitive Advantage in a Down Economy Avoiding Scams when looking for business funding

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