Is Your Investor an Angel -- or Devil?

Sometimes so-called angel investors can impose terms that are positively demonic. If so, a regular bank loan might be a better bet

Q: I found an angel investor for my small business. He's loaning me $10,000 to purchase inventory over two years at a low interest rate. What percentage of the net profits is acceptable to pay him during that time and after the loan is paid back? -- A.B., Sacramento, Calif.

A:

Let's start with a more fundamental question: Are you really dealing with an angel? It sounds like this "investor" not only wants his loan repaid with interest but he also wants profit-sharing in your company after the loan matures. That's a pretty sweet deal -- for him. But it may not be so heavenly for you and your company.

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