Explaining Informal Investors

If you're an entrepreneur, at one time or another you have probably sought to answer the question: "Where can I get the capital I need?" For most people, the answer is from their own savings or the existing cash flow of their businesses. But for some, it means seeking money from others.

The many sources of external capital for entrepreneurs range from banks to trade creditors to credit cards to venture capitalists. Getting a loan from an outsider is more common than getting an equity investment. And some sources, such as credit-card companies, provide small amounts of money to lots of people while others, such as venture capitalists, provide larger amounts to a handful of businesses. But one source frequently mentioned in books and articles is "informal investors," a term that lumps together friends, family, and business angels.