Startup culture is on the rise. A lot of engineers and other young graduates are thinking of innovative ways to set up their businesses. The size of the business doesn’t matter and any business would require capital to get the wheels running. When looking out for options for financing a business, one is provided with unlimited avenues. Amongst all, two stand out. One is bank loans and the other one being angel investors. Now, the question of the hour arises, which one is better? To know that, read on.
- Bank operates under an already prescribed set of rules and conditions. The rules are defined by the governing body and not by a single person. Rules are defined for a particular duration of time and are not subjected to change without any prior notice. The public sector banks don’t change their lending policies overnight. There might be some cases where the private sector banks might bring in new policies and changes without prior notice.
- The finance available with the bank is public money and it gets extra cautious when it lends money to businesses. Generally, the banks never think twice before lending money to established firms as the return on investments are guaranteed. But, when it comes to startups, as the situation is very unlikely to predict, the banks get very serious with their terms of lending.
- The bank is not focused on obtaining the profits from the firm rather it looks whether the firm can pay back the loan it has obtained. The bank fixes the same terms and conditions for any customer who approaches the bank. Also, when imposing charges on a firm, the bank sends out legal notices and other announcements.
- Angel Investors are either a part of a private limited firm or they work independently, individually. They are not bound by any pre-defined set of rules and regulations. They can mend their ways of dealing and operation based on the business they wish to invest in. Also, angel investors set different rules for different businesses.
- The angel investors are much particular about the kind of profits your business could reap. The angel investors can change the category under which the finance has been lent. In case, the angel investor has lent under the loan category, he can change it to equity or long term debt. The angel investor can also make sudden decisions which might even lead to situations where the business would move to his hands.
- No matter what the size of your business is, the angel investor can even lends his ideas in marketing as well. For instance, you begin a vape juice firm and he might suggest some ideas for marketing the best CBD vape juice, medicines, and others you aim to sell to the consumers.
When considering the security aspects, it is much better to go for banks. But when you are left with no other option to choose from for your startup, it is better to go with an angel investor. Make sure the angel investor is from a trusted source and read the terms and conditions carefully before striking a deal with them.