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definitions of the types of Investors

definitions of the types of Investors

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City area: Dc City: Washington Region: Colombia Country: United States
May 29, 2019

*Below are definitions of the types of Investors (this is mainly for your own knowledge)

  *Private equity investors:

 When a company wants to raise money for its operations it has some ways, 1. Taking a loan from bank, 2. Accepting public fixed deposits, 3. Issuing debentures or loan bonds 4. Issuing preference and/or equity shares. 

 Within these when the company wants to issue preference or equity shares it can do so either by a. doing an IPO, b. issuing rights shares or c. private placement.

 Private placement means that if the amount the company wants to raise is comparatively low and company does not want to incur cost of issue then it may approach a few wealthy investors to invest their money in the company. So equity or preference shares are issued to a few people at a minimum cost. This is called private placement. And those who are these wealthy investors are called Private Equity Investors.

*Hard Money Investors:

Hard money lenders (HMLs) are typically private individuals or small groups that lend money (Hard money) based on the property you are buying, and not on your credit score. Usually these loans cost (percentage-wise) much more then an average mortgage, often times up to twice what a regular mortgage does, plus high origination fees.

Who Needs Hard Money?

 Developers and house flippers, amongst others, will use it to fund deals because you can often borrow up to 100% of your purchase price! On the other hand, hard money lenders will frequently require you to back up your loan with real assets. If you know you can buy a property and turn it quickly at huge profit, and you can't get a standard mortgage, it might be one way to go. Some investors use hard money to get into the property, do some quick fixes to raise the property value, and then get a new loan (based on the properties new, improved value) from a bank to pay off the hard money lender.

*Angel Investors:

 An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.

*Venture Capital:

 (Also known as VC or Venture) is a type of private equity capital typically provided for early-stage, high-potential, and growth companies in the interest of generating a return through an eventual realization event such as an IPO or trade sale of the company. Venture capital investments are generally made as cash in exchange for shares in the invested company. It is typical for venture capital investors to identify and back companies in high technology industries such as biotechnology and ICT (information and communication technology). Venture capital typically comes from institutional investors and high net worth individuals and is pooled together by dedicated investment firms.

*Direct Lender:

A loan by a lender to a customer without the use of a third party; direct lending gives the lender greater discretion in making loans.

*NON-BANK Lenders:

Non-Bank Lenders located throughout the country that obtains their funds, Not from deposits but rather from the sale of notes and bonds on Wall Street and through private investors.  They are, therefore, able to take on more risk and provide financing for tougher transactions that do not qualify for bank financing. This includes companies that are in Chapter 11, that have losses or a negative net worth or that may have a tax lien.

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Dr. Wasfi Abdo
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