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ACCA Applied Skills · Financial Management · Finance for small- and medium-sized entities (SMEs)

Which of the following is a key feature of business angel financing for an SME?

Business angels are wealthy private individuals who invest their own money, usually in return for equity in early-stage businesses, and often contribute management expertise and contacts. They are not institutions, do not require a listing and receive no government guarantee.

  1. AWealthy individuals invest their own money, often in early-stage businesses, and may also provide management expertise and contactsCorrect
  2. BFinancial institutions pool funds from many investors and require a stock market listing within one year
  3. CThe government guarantees all repayments of the funds invested
  4. DFunds are provided only as short-term overdrafts repayable on demand

Explanation

Business angels are typically wealthy individuals who invest their own funds in small, often start-up businesses in return for equity, and frequently contribute experience and networks. They are not institutions pooling funds, there is no guarantee of repayment, and their finance is equity rather than overdraft.

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