Get to know Angel Investors

It's time to get to know the possible sources of business financing.

1. Angel Investors
2. Venture Capitalists
3. Personal funds, credit cards, family and friends
4. Business loans

The above cited are four (4) of the possible sources where we can get financing for our business. This time around, let's get to know first about Angel Investors. Who are these Angel Investors? I found a helpful article written by Scott where he presented Angel Investors in a more interesting way.

A business angel is a person who provides capital from his own funds to a private business owned and operated by another person who is neither a friend nor a family member.

The typical angel is often described as a wealthy, retired, former tech entrepreneur who regularly invests in other people’s start-ups. While a few angels look like this, the typical angel does not.

Most angels aren’t wealthy. Estimates based on data from several sources suggest that the majority of angel investors are unaccredited investors.

• Few angels are retired. About two thirds are still working full or part time.

• The majority of angels live in two earner households.

• Most angels aren’t old. Surveys show that the odds that a person makes an angel investment peaks at between 45 and 54 years of age.

• Angels are more educated than the rest of the U.S. population, but one quarter of them have not graduated from college.

• Angels are no more likely to be experienced entrepreneurs than friends and family investors.

• Angels tend not to make many such investments, with a significant minority making just one angel investment in their careers.

You can read more about Angel Investors in Scott Shane's article -- What do Business Angels Look Like?

A Different Picture of Credit Market Today

You might as well is wondering the status of our financing, more specifically the credit market today. Well, I’ve had a chance to read a post by Anita Campbell at American Express blog saying that there is a very different picture of credit market today.

Throughout this entire credit crisis, I’ve had the bizarre feeling of being caught in a Star Trek episode. Like the episode of Star Trek where they’re exploring the Delta Triangle (the deep space equivalent of the Bermuda triangle). Captain Kirk and crew happen upon an alternate universe containing a vast graveyard of space vessels and inhabited by the descendants of people from the original vessels. The starship Enterprise is caught there until they manage to generate enough power to pull the ship out of the alternate dimension back to the normal universe.

Just like Captain Kirk and crew, I feel like there are alternate universes out there as they relate to the current global credit crisis.

You have Wall Street, which has gone through some manic trading in the past weeks. Through a series of events that the average American hardly understands, the investment banking industry more-or-less disappeared from the American landscape overnight. Central Banks and government authorities around the world are meeting and working together in unprecedented levels. And we’ve seen the government intervene into the U.S. banking system in ways not seen in the better part of a century. With each passing day we look for signs that the world credit crisis is calming, but it’s been a wild ride.

Well, we are definitely in recession these days but the best we can do is how we can strive and win over these down times of our economy. Check out more of this article in American Express Open Forum Blog.

Finance hell freezes over!

According to business spectator Nick Samios, Finance hell freezes over. What does he mean by that? Below I quoted his write up from BusinessSpectator.com.

“The economic crisis we face is the worst since the Great Depression. Businesses large and small are finding it impossible to get loans, which means they can't buy new equipment, or hire new workers, or even make payroll for the workers they have”.

If this quote sounds like hyperbole, that's because it is. It is lifted directly from Barack Obama’s speech in Tampa, Florida a day or so ago. This fact that makes the quote no less chilling.

Whooah! Chilling, isn't it? Well, read more about this small business finance news.

Community Development Institutions Offer Small-Firm Funding

Fund raising is everyone's business. In fact, this is one of the most difficult part in building up your business. Well, here's a good news I found from The Washington Post and they are giving us this opportunity to raise funds.

Community Development Institutions Offer Small-Firm Funding

While discussions about the nation's economic growth are often focused on big business, small businesses keep the nation diversified, act as an innovation engine and employ just over half of the private sector workforce.

From 1993 to 2003, firms with fewer than 20 employees accounted for almost 80 percent of net new jobs in the United States.

One source of financing for many small firms comes from Community Development Financial Institutions, or CDFIs, which exist to help boost low-wealth or distressed communities. At the end of 2006, CDFIs had given $105 million to firms with five or fewer employees with a maximum loan investment of $35,000. They gave nearly $4.2 billion in 2006 to firms with more than five employees in loan amounts greater than $35,000. The average CDFI loan size for micro firms was about $11,000 and for small businesses it was $93,000.

Read more about this news written by Sharon McLoone at The Washington Post.

Federal Agency Opens Hot Line On Small-Business Financing

I am pleased to inform my readers here about the twist in business financing in Connecticut. Well, how would you react to the opening for financing hot line? Read more about this news below courtesy of Courant.Com!

Small-business owners with questions about finance or other business operations can now call a small-business financing hot line launched this week by the U.S. Small Business Administration's Connecticut district office.

The Hartford-based hot line is intended to give the state's small-business owners a single phone number for help with business-related questions, said Bernard Sweeney, district director of the SBA for Connecticut.

"While I haven't heard of any banks that have pushed people away," Sweeney said, "we want to be able to tell people what kind of financing is out there and where they can go for it."

The hot line number is 860-240-4654, and it is available Monday through Friday from 8:30 a.m. to 4:30 p.m. Messages left during that time will be returned the same day.

Well, I have nothing against this noble move of Hartford financing hot line but I am just wondering how broad or specific the questions that the hot line can answer and who are the credible people behind this hot line that small business owners can be given credible answers as well.

Lending crunch hits consumers

According to Lisa Wright and Rita Trichur of TheStar.com, whether you're a small business person or a consumer looking to buy a car or a home, it's becoming harder to get credit.

This U.S. financial crisis is really alarming because it affected the global economy. Well, it is expected to be since U.S. is undeniably one of the most powerful country in the world and a lot depended to them in exports, imports and everything that has something to do with business. .

Well now, this crisis that just obviously affected all size businesses but also the consumers. Consumers are neither an excuse to this crisis. Read more about this update in this article - Lending crunch hits consumers!

Will the Credit Crisis Hurt Venture Capital?

Scott Shane throw a question in Small Business Trends asking if the Credit Crisis can hurt Venture Capital.

Recently, there has been some discussion of whether the credit crisis is helping or hurting venture capitalists.

The argument that it is helping holds that the credit crisis has made returns from venture capital investments more favorable than returns from other types of private equity. The high returns to private equity in the past few years were driven by inexpensive credit so taking away that cheap credit has brought private equity returns back into line with other investments.

Maybe. But I’m not so sure that the credit crisis is helping venture capitalists. There are several reasons to think not.

According to Scott, he has several reasons why it can't hurt.

1. Exit through M&A
2. IPO Drought
3. VC Firm Operations
4. Portfolio Company Performance

What are these four points above? Check it out in Scott's article - Will the Credit Crisis Hurt Venture Capital? and tell me what you think about it.

Entrepreneurs with Poor Credit Face Crunch

According to Scott Shane, entrepreneurs with poor credit rating history are the ones who face serious credit crunch.

Entrepreneurs with poor credit have to pay so much more than entrepreneurs with good credit to borrow money from their peers right now, the former are probably unable to borrow money at rates that let them profit from the opportunities they are pursuing. This pattern supports what many economists have said recently: the entrepreneurs with poor credit are the ones facing a severe credit crunch.

Don't worry, Scott presented data analysis about this claim. Check it out in his article at Entrepreneurs with Poor Credit Face Crunch.

Open letter to President Bush: Bail out small businesses, too

There's no other much alarming news today none other than the financial crisis in America specifically the Lehman Brothers bankruptcy and now this bail out plan added more intense to this situation. I don't really know if this bail out plan is the best solution to this crisis but my goodness, $700 Billion - is a big, big money. Check out Rhonda Abrams's open letter to President Bush: Bail out small businesses, too.