Investor funding can provide an ideal alternative to businesses that are unable to access money through traditional business loans. There are two main types of investor funding currently available and they both offer distinctive funding opportunities for businesses.

The first main type of investor funding is crowdfunding. Crowdfunding allows you to present your business proposal to a range of potential investors. These investors can then decide whether or not to invest in you by putting forward direct financial investment into your business. Both business and investor benefit from the crowdfunding system. It offers a funding opportunity to those businesses that may not be able to receive funding from a traditional business loan. It also allows investors to fund entrepreneurs they believe will achieve their business objectives and bring them a higher return than they might receive by simply putting their money into a savings account.

The second main type of investor funding is that of business angel funding. Business angel funding is very similar to that of crowdfunding as start-up businesses have to pitch their business ideas for funding to potential investors. However, business angel funding is not a pooled resource from multiple individual investors. Instead, angel investors tend to be high profile business leaders who choose to invest either the full, or a significant amount of money, into the project itself. The result of this is that your business receives both the financial and personal backing from someone already well established in business who can provide access to unique contacts to help your company succeed.

Businesses who receive funding from angel funding will receive the knowledge and experience of their angel investors and, in return, will be expected to provide regular updates and reports on the success and development of their business. This regular analysis of the business can be a really good tool for new business owners as it allows them to see their business is on track to success. However, although you are receiving excellent advice from your angel funder, you do need to ensure that they are not taking over the business itself. You need to ensure that you both have clear expectations before entering into any funding agreement. Make sure you know which goals are important to both yourself and the angel investor and identify where you want to take your company over the duration of the funding agreement with the angel investor. By laying down the ground rules before entering into a funding agreement you will make it much easier to sort out any disagreements that may arise during the term of the investment.

Investor funding can be an incredibly powerful source of funding for new businesses. It means that the business has been funded solely on the potential of your business idea and shows a clear belief that your business will succeed. Such belief is a powerful basis from which to start your business from because if people are prepared to fund your business idea then that means your business has a firm grounding for success.