Pros and Cons of Incentivizing Angel Investors

We at The Factoring Blog feel that the following issue is of some significance for prospective small business factoring clientele, or for any business owner in need of funding.

A debate earlier this year on The Wall Street Journal’s website explores at length the importance and influence of informal, affluent investors. Angel investors may be without institution, but they are not without tremendous significance in the world of financing start-ups and small businesses.

This has led some legislators to question whether angel investors ought to be given tax credits for their services to small businesses. After all, they, more than many other financiers, have to expect long delays in acquiring returns on the start-ups they decide to fund.

The generosity behind enduring these delays not only reveals the source of their namesake; it also makes becoming an angel investor an understandably unappealing undertaking. This fact, however, does not stem the need for their services.

The Journal does a nice job of prefacing the debate by offering opposing perspectives on the effectiveness of tax breaks for angel investors.

Proponents of the idea say it could work on two fronts: First, it would generally encourage angels to invest in start-ups. Second, the measure would provide them with more working capital, so they can better serve their communities.

On the other hand, critics worry about the potential for tangible, concrete results that can be quantified in terms of real “evidence that credits increase investment levels or create jobs.”

In the meantime, don’t wait around for angels to swoop down with pots of gold to help your business grow. Factor your receivables and claim the gold you’ve already earned. A small business factor will make no attempt to claim neither debt nor ownership from your company. Your debt to the factor is hoisted on your customers, and the only ownership your factor will claim is over individual invoices bought for cash.

Sound angelic? Then try factoring today.

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