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New Businesses and Angel Investment

A new business depends primarily on the management skills of the entrepreneur. The most successful entrepreneurs manage their resources by minimizing the amount of capital needed to start and grow their business. Angel investors want all of their investment put directly into making the business grow in order to insure a high rate of return, which should be about 20% to 30% per year on the invested amount. It is often a mistake among entrepreneurs to think that there are no competitors that operate in a similar capacity to their business, and this should be shown in your business prospectus as it relates to starting a company with money from an angel investor. Equity will almost always be required as a negotiating tool as it relates to working with a private third party funding source.

The details of how you will accomplish the goals of your business are described in your business overview documents. Entrepreneurs often have the misconception that a new business idea must be unique in order to be financed by an angel investor. However, this is usually not the case as the most important thing about your business is that it is economically viable. An expanded executive summary can be used to attract the attention of potential investors, and this should be shown within your new business plan.

Angel investors usually ask for less equity than a venture capital firm due to the fact that they require less capital and are less risky. We always recommend that you work closely with a CPA when you’re going through the very complex capital raising process. If it is investors you seek, do what you can to make the opportunity you present to them as attractive as possible. You may wan to find discussion groups for additional advice and support on business plan writing.

The ROI of your business should be more than 20% per year as it relates to working with a professional investor or individual funding source. An organizational business plan will be organized in a similar fashion as any other business plan as it relates to working with these individuals.

Writing a good business plan is one of the most important parts of raising capital as this will put all of your ideas for a business in a document that you can use to raise capital while also providing you with a guideline for how to expand your business. If you are uncertain as to how to put together a business plan specific for an angel investor or venture capital firm then you need to work closely with an appropriate adviser in order to accomplish this goal.

How to Keep Your Spouse Safe in Business

As a structuring adviser to investors and business owners we often come across a widespread mistake that many people make.

That is a spouse being offered as a guarantor to the financial institution, landlords or creditors of a business. Often their personal guarantee is even needed for the agreement to proceed yet it is given.

Why? Because the advisers do not defend you and point out that it’s not required.

The upshot is that if total business or investment collapse happens, both spouses are fully liable rather than just one. Sure, the creditor, bank or landlord asking for your spouses guarantee will explain it is necessary 100%.

This is because it is in their. Yet it is not in your interests. My advice is NEVER give your spouses guarantee in business or property transactions if you can keep away from it.

I have developed over 80 million dollars in property, and guaranteed a number of numerous business and banking obligations, purchased multiple investment properties, – and my wife has never signed a personal guarantee on the transactions. Why?

To protect her from the potential risk and obligation. How did I avoid her being liable? By saying ‘no’ to the banks and creditors when they asked. Did it interfere with her legal or matrimonial rights to recuperate the property if we separated?

No, — she still receives the assets because she jointly controls the Trusts and numerous borrowing. This is not about removing power away from your spouse and potentially wealth, it is simply to do with reducing your risk to your family.

Examples of this include:

1. Borrowing funds from a lender to buy an investment property or even your family home. If one spouse is a homemaker, has no income or their income is not required to meet debt servicing criteria of the bank, then why allow the bank to take their guarantee?

The only purpose of the guarantee will be to use more pressure to your household if you have difficulty, and both spouses go bankrupt rather than one (which may be viewed as malicious in this light).

2. Handling land-lords when it comes to commercial leases and guarantees. Ensure you attempt to divide leases out into separate ‘tenancy companies’ and make one spouse a director of this company.

Your opening position should be no personal guarantee, and if ‘no personal guarantee’ is a deal breaker with the landlord, then only the director/one spouse gives a guarantee.

Try not to give an unlimited guarantee, limit it to say XX months rent, or a fixed sum as a cap.

3. Dealing with creditors over personal guarantees. Creditors in business will normally ask for a personal guarantee.

Decline to give it if you can get away with it, and most of the time you can. Where you have to give one, just as with a landlord ‘limit the guarantee’.

In summary, protect your spouse from liability if you can help it. Personal guarantees and spouses should not go together. If you are negotiating with a landlord or creditor as a business owner and have to supply a guarantee, try not to give a guarantee at all, or limit the guarantee to a fixed sum

(Eg: 6 months rent. If your spouse has no income, you should be able to avoid their guarantee being given to a lender/bank)

Try using a mortgage broker to achieve this. Usually the banks (if dealing direct) will be very difficult to manage on this issue, especially in this recessionary climate.

There is an excessive amount of traffic coming from your Region.

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