EQUITY FINANCING

Private Investors
You have the opportunity to use private investors as potential financing sources. They can be used as debt or equity sources. Typically the required rate of return for a private investor will depend on their perception of the risk versus reward scenario. However, private investors usually require a lower return on investment because acquisitions are less risky than start-up ventures.

Private investors can be any of the following people: family, friends, suppliers, accountants, customers, business associates, business professionals, or attorneys. Angels (Fiedler, 1986) are also considered to be private investors. They are investors, often a business person that remains anonymous, who want to put excess cash to work. Angels are the largest source of equity capital for small businesses. It is estimated that 720,000 angels invest $32.7 billion of equity in small businesses every year (Fenner, 1991). Due to their anonymity, angels are very difficult to access unless one is tapped into the network of venture capitalists. You can find them through your network of accountants, bankers, attorneys, financial advisory firms, suppliers, or key customers.

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