How Angel Investment Can Help Your Business

Retailers and hospitality businesses looking for additional financing are well advised to consider the benefits of angel investment. Growing any business requires funding, which can often be extremely difficult to source from traditional lenders, like banks and venture capital providers.

Angel investment is a lot different, as angel funding is acquired direct from an angel investor who will invest their own funds. This can mean that loans are a lot easier to acquire, as bureaucracy is cut to minimum levels and generally the angel investor makes the lending decisions, cutting out any need for excessive meetings and paperwork.

The benefits of angel investors

Angel investors tend to be high net worth individuals and entrepreneurs, and they often provide startup funding as this produces healthy returns.

Some of the major benefits of angel funding include:

1. Speed

Approving angel funding can be extremely quick as investors don’t have institutional investors, board members or shareholders to report to. This makes due diligence and the approval procedure very speedy, which can be a real benefit within retail and hospitality when funding is needed to cover shortfalls or rapid expansion plans.

2. Expertise

In general angel investors that tend to be willing to lend to businesses have in depth knowledge of the relevant sector. This can prove extremely useful over the long term, as your investor can also provide sound advice.

3. Involvement

Any angel funder has ongoing interest in the performance of your business, after all they are investing their own wealth into your success. This means they do all in their power to help ensure the success of your company.

4. Quick access to cash

If you’re looking for immediate business growth, the fact that angel funding is often provided in one lump sum helps you expand more easily. Other forms of capital investment can also be arranged if preferred, with cash input spread over a longer period of time.

5. You retain independence

It’s generally the case that angel investors aren’t interested in joining your board or taking control of any future expansion or funding of the company. Usually they require a simple loan structure and will lend capital in return for equity. This means they are far more distant than is usually the case with venture capitalists.

Angel investing in the UK

Angel investor networks really took off in the UK as a result of the 2008 financial crisis and the lack of available funding from banks. This trend is continuing and angel investors reported that they invested more in the year 2016 than in 2015.

Most of the UK’s angel investors are located in the South East of England and the London area, but they will fund businesses throughout the UK.

Making an application for angel funding

If you plan to apply for angel funding these simple tips can help ensure success:

– you will need to pitch to your business angel, with a presentation that should take no more than 10 minutes or so. This means you need to have all your financial forecasts, revenue details and business plan off pat, so keep practising your presentation before your meeting. Ensure your presentation is direct and don’t hold back on any important details, it will be revealed at the due diligence stage anyway, so be honest about any drawbacks or likely pitfalls to your plan.

– be specific about how much capital you require and back your request up with solid financial data.

– angel investors carry out very intensive scrutiny of any proposed investments, so be ready to respond to any questions as quickly and succinctly as possible.

– be prepared to negotiate hard to achieve the best possible terms for any deal. You should expect to lose some business ownership as part of your angel funding approval, but ensure you negotiate hard about every aspect of the arrangement.

– make sure you get good legal and financial advice before entering into any deal, and also spend time talking to other business colleagues and partners so you can secure the best possible funding structure.

– before signing off any angel funding deal, take time to step back and seek more financial and legal advice about the proposed deal. Taking a step back to consider options is a key aspect of all decisions of this nature.

Virgate Accounts provide outsourced finance solutions to help ensure businesses within the hospitality and retail sectors operate on a secure and successful footing. We work alongside many angel investors in these sectors. Get in touch with us for more information.