The subject of this paper is the analysis of alternative forms of financing with a focus on business angels as one of them. Business angels are private alternative investors who have gained wealth and entrepreneurial experience during their active working life. They are prepared to finance small and medium-sized enterprises to help young entrepreneurs, while gaining profit as well. Business angels are defined as wealthy individuals, on average about 50 years old and predominantly men. They invest ‘smart money’ and in addition to financial resources they invest their knowledge, experience that provides their expertise, skills and business contacts, increasing the chance of success of the project they are financing. The idea itself, no matter how good and innovative it is, worths nothing without a top team of people who support it. If they want, they unite in angel networks and syndicates for efficient business and support. Networks provide members with more knowledge and the opportunity for greater investment thus increasing the chances of project success. In the world, and especially in the USA, there is a well-known and often used source of financing entrepreneurship, but it is still insufficiently represented in Croatia. For long-term economic progress, government policies have a positive role to encourage bigger number of angel investors. In Croatia and most other countries, these policies consist of tax breaks and the creation of mutual funds regulated by law.