Raising Growth Capital for your Corporation
To grow your business, you’ll need capital. In some cases, you might be able to use company profits and savings to fund growth, but in many instances, you’ll need to raise growth capital. There are many different ways to raise funds for your business, and the method you choose will depend on several factors including the nature of your expansion, your financial situation, the structure of your business, and more.
Here are some tips for raising growth capital for your business.
The Differences Between Debt Capital and Equity Capital
To start off, it’s important to review the differences between debt capital and equity capital.
Debt capital is a common form of funding for companies. When an organization wants to grow, it can take out a new loan, open a line of credit, or borrow money in another way. Most forms of debt capital come with interest charges and the debt must be repaid regardless of how the business performs. An example of debt capital is getting a business loan from a bank.
Equity capital is generated by selling shares of stock in your business. In this case, the corporation is not required to repay the debt in a traditional sense (you do not have to repay what you owe plus interest in regular payments, for instance). Instead, shareholders receive a return on their investment based on the performance of the corporation. However, the potential risk for the organization is that shareholders are able to influence the direction of the company.
Now that these two methods have been explained, here are some ways to fund financing for your corporation.
Banks and Traditional Investors
Business loans are a very common way for companies to access growth capital. While these loans are often associated with smaller businesses, they are also useful for larger organizations. Lines of credit from traditional investors can also help a business afford its growth.
If you are planning on applying for a business loan, it’s critical that you have a strong business plan and growth forecast that you can show the lender. The team at Ralevic & Ralevic LLP can assist you with the preparation of financial statements, as well as budgeting and forecasting services. We can also develop a professional business plan for your organization to help you attract investment.
There are established corporations that use crowdfunding. It’s not just small start-ups. However, a lot of the larger businesses that use crowdfunding sites do so more for market research and product testing than for growth fundraising.
However, crowdfunding sites can assist with business growth if your business is hoping to branch out with a new product. By offering the product at a discount on crowdfunding sites, you can conduct market research for a fraction of the cost and use the feedback you receive to impress more traditional investors.
Investment Companies and Angel Investors
For many corporations, receiving growth capital funding from an investment company or angel investor is the right way to go. However, you’ll need to create a strategy for how you will get your business in front of the investors you’re looking for, and then make sure you have a way to impress them once you have their attention. Trust the team at Ralevic & Ralevic LLP to help your organization develop high quality investor packages for private equity firms and institutional investors. We can also represent you at investor meetings and presentations. For more information, contact us today.