Angel investors are successful businesspeople who dig into their deep pockets to finance new businesses with high growth potential. If you're low on start-up capital, an angel investor can truly seem "heaven sent," but it's important to read the fine print.
First of all, money from an angel investor is not a loan. It's an equity investment. An equity investment buys the investor a share in the ownership of the company [source: FindLaw].
So if you accept money from an angel investor, you're also giving up partial control of your new business. An angel investor will ask for at least a 10 percent stake in your business, but could go as high as 50 percent for a riskier start-up [source: Entrepreneur].
For many small business owners, it's difficult to cede authority to an outside investor, so think hard before attaching strings to your money. On the bright side, since angel investors don't give loans, there are no regular payments with interest to worry about. As partial owners, however, they'll take a chunk of your profits.
How do you find an angel investor? Ask people who do business with the extremely wealthy, like bankers, accountants and lawyers and do research into local venture capitalist clubs. Or you could just hang out at a country club golf course on a Wednesday morning. That works, too.