The Role of Business Angel in Financing Small Business

Abstract

Angel investors can also be referred to as business angels or informal investors. These are prosperous and comfortable people in the society who are ready to invest their money into small businesses especially feasible start-up firm or nascent business while in many cases they request for ownership equity or some form of convertible debt in exchange for their investment. Business Angels carry out a crucial purpose in rendering seed capital or start up financing where the size of the funding is considerably small and no other investor is ready to serve the purpose. Small businesses are important innovators in most economic development. It was observed that the death of many small businesses was due to lack of fund to survive and or expand.  Due to limited fund available to small businesses to operate at the start up, they have to rely on personal resources, bank credit, friends and relatives, trade finance, government aids and business angels as primary sources of fund to commence operations and planning for future development. This paper addresses the different sources of financing, the significant of business angel and the impact on the small business. The study proposes an understanding to fortify a very good structure in which small business can benefit abundantly from business angel. The research survey was carried out from a case study of design consultant who has benefited from business angel in United Kingdom. Moreover, the study recommends that Nigeria government should provide an entrepreneurial framework conditions for business angel operations and also emulate and encourage the use of business angels in financing small business to reduce unemployment.

Keywords: Small Business, Business Angel, Sources of finance, Equity capital, Network