Small Business Investment Companies
SBICs are highly viable alternatives to companies that are too big for individual investors and too small for venture capitalists. As such, you should consider working with these private investment firms rather than working with an individual funding source. Angel investors love working with companies that are already profitable. The capital you receive does not require you to give any capital to a third party investor. There are a number of differences between working with angel investors and working with SBICs. When looking for private investment, you’ll need a well-developed cash flow analysis, which is often more important than your profit and loss statement. If you are looking to purchase real estate, it may be in your best interest to work with the Small Business Administration rather than a private funder or SBIC.
If your business is not recession proof, then you may have a lot of trouble getting the capital you need from an angel investor or SBIC. You need to hone in on your ability to get your idea across to any potential funding sources so they can clearly understand what you intend to do with your capital, and this is especially true if you intend to work with a small business investment firm.
Companies that are financially profitable can take advantage of some downturns, such as medical companies, which are particularly popular with angel investors. Before seeking outside capital, you should always consult with a certified public accountant. SBA loans, unlike equity loans, require monthly principal repayments, which can be a good alternative to selling a substantial equity interest in your business to a third party.
Preferred stock generally does not allow angel investors a say in the ongoing management of their business, but this type of financing is often very expensive. SBICs may try to provide you with both debt and equity. It should be noted that a private investment company can fire you at any time. Angel investors generally request less capital than a small business investment company. Your business plan, especially the one to be presented to an angel investor or SBIC, should be a scientific document that shows why it is a good investment for the individual financier.
Your CPA will be able to provide you with all the necessary information related to the cost of the associated with the capital you are looking for. Finally, it should be noted that small business investment firms are licensed and regulated by the Small Business Administration. As such, you will have a strong ability to deal with these companies on an ongoing basis.