A company or individual that takes their own money and uses it to help another business or individual is known as a private investor. They invest in small or large start-up businesses, as well as businesses that have been operating, but have run into hard financial times. Some private investors also help individuals who cannot secure a mortgage or loan through a bank. The investor will negotiate the terms of the investment.
An angel investor is often called an informal investor or business angel. This affluent investor provides the start-up business with the capital they need. What the angel investor expects in return is either convertible debt, or ownership equity. The risk that the angel investors take are extremely high, which is why they require a high return on the investments they make. There are often numerous investors who pull all their research outlets and money together to form angel networks.
Some private investors have the option to invest passively, meaning they give their funding, but they do not play a role in the company they have invested in at all. Other investors have an interest and have the necessary capital, but they do not have the entrepreneurial skills it takes to run a company. Therefore they invest with the intent of learning more from the business, and having a role in the company, or a seat on the board of directors.