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The Advantage of Angel Investing Through Collateral Enhancement
from: ForsgrensThe past few years have seen the emergence of so-called “angels”. And, no, these are not the angels you are thinking about. These are people who are known as angels within the business circle.
Why?
They are known as angels because they almost seem too good to be true.
After all, how would you feel if a rich man decides to give you the finances you need to get your company off the ground for a few shares? You would feel very lucky, right?
What about if that rich man gives you that money out of his own pocket? Then you would feel like you were touched by an angel, right?
However, as we are talking about people here, it may take you a while to get an angel to notice you. It would even take you a longer while to convince that angel that your company is worth the investment. It would take you even longer to assure the angel that there would be minimal risk to his money.
That’s where angel investing through collateral enhancement helps.
You see, sometimes the interest in your company alone would not be enough to convince a potential angel, sometimes you need to back it up with something more substantial.
After all, nobody will ever lend money to anyone (even if it’s your own best friend) without guarantee of payment, right?
And the more the guarantees, the better, correct?
That’s how angel investing through collateral enhancement works. You convince your potential angel, that there is virtually no risk of losing money.
Think of angel investing as giving that angel a reassurance that he won’t lose his wings from helping you.
How does angel investing through collateral enhancement work?
Here is a brief summary of the important things you need to know:
First, you need to find your potential angel. Remember it is not what you know, but whom you know that counts.
You can find your potential angel through national and regional networks of angel investors. Their contact details are displayed in web directories of angel investors’ networks.
If an angel chooses to listen to your presentation, then the real part of angel investing through collateral enhancement begins.
First, you need to show that you have what it takes to make their money grow. Show them the idea that’s so brightly shining in your head.
Remember that it will be their cash on the line, so their attitude will be different from venture capitalists.
When they ask about the interest of your company, show them the interest you are willing to part with in order to get the company up and running.
If that won’t be enough, then you need to add in some collateral.
Angels also need to see an escape plan in case the whole company bombs.
If you cannot convince them of the value of the collateral, then you need a guarantor.
Here is why it is called “angel investing through collateral enhancement”:
You need to “enhance” the collateral in their sights. By using a guarantor, you do just that. Although there are some potential roadblocks to finding the right guarantor, an angel investor will basically be more willing to go along with your plan if he sees that he has virtually nothing to lose.
With angel investing through collateral enhancement, you have a distinct advantage over others seeking angel investments.
After all, where would you rather go: a very risky road to success, or a guaranteed road to success?
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