Angel investors' doors still open

A small business owner friend of mine went to see their bank this week. I asked how he found their bank manager. He replied, "Petrified with fear".

It is easy to understand why. The economy is in a mess, and apparently it is all the fault of the banks. Despite this not being the personal fault of the lowly branch manager, many of them are deeply fearful for their jobs, and the last thing they have on their mind is lending money to anybody unless they have significant collateral.

New pastures

So where do small businesses now go to fund their growth? Many people will delay the process until the recession ends and look at reducing their costs instead. While this is a sensible and prudent approach, it is potentially risky as it leaves you open to more aggressive competitors, or even your chosen market quietly moving on to new pastures while you wait.

But if you were thinking about growing your business, it was because you identified a new market opportunity or were simply responding to increased demand from your customers.

This is where the best solution to your funding challenge lies - with your existing happy customers. They appreciate your products and services and do not want you to go bankrupt. If you ask them nicely they might place some new orders or suggest new ways that you might provide additional value, especially new services, which require minimal up-front investment.

For companies under 25 people, doubling your revenue within a reasonable timescale is a realistic target, but it does require everyone in the company to be involved in the sales process.

I concentrate in my workshops on improving 'farming' skills, how to get more out of existing customers. The point of these workshops is clear: those companies that do manage to double their sales will not be affected by the recession. Plus, you are much more likely to be able to arrange a new bank loan with a full order book.

But what if you do need up-front investment to grow your business? Venture capital companies are now much more risk-averse than they were before, and I am even being told of whole funds that have been withdrawn in the last few weeks.

For businesses looking for under a £1m (Dh5.69 million), the climate is not as difficult as it might appear. Angel investors are still looking for higher-risk investments; the funds they had for this a few months ago have not suddenly gone away.

This was not money they had set aside for their children's education; this should be "fun" money, something that gave them the chance to be personally involved with interesting people who remind them of their own halcyon days as entrepreneurs.

Investment decisions will be subject to more scrutiny than before, so angel investors are now concentrating on companies where they know the principals. It is important that if you do not know any angel investors, you find yourself a non-executive director who does.

When raising any amount of investment, the process should be relatively swift. The investor should understand what you do quickly; some have even been known to write a cheque on the spot.

The writer is a best-selling author, keynote speaker and entrepreneur mentor, co-founder of Beermat.biz, an on-line resource for entrepreneurs.