How to get extra money for business development?
Do you take out a loan?
Do you turn to investment funds?
Or maybe the stock market?
Or issues of debt securities?
Companies often get the problem of choosing the appropriate source of funding and its subsequent acquisition on attractive terms. To date, the most common source of development of the company was its own capital and credit. Making the right choice based funding offer banks, funds of a "venture capital" or capital raising capital on the stock exchange.
The decision on whether the IPO should be preceded by the development of a clear and well-thought-out financial strategy means that the first step is a thorough rethink and formulate the development strategy of the Company.
Only then can decide what further developments and its method of financing. One of the basic decision is a choice between equity financing (ie, profit, capital increase by existing shareholders or new shareholders the sale of shares) and foreign capital, that is, bonds or credit. Equity accepts much higher risk than financing the project loan and provides greater flexibility in decision-making. Funding equity ownership affects the system and in the economic sense is much more expensive in the future, because it expects higher returns. However, at the beginning, companies often need equity and not loans.
In turn, the credit is cheaper and easier to be repaid, but it requires a specific order and security. Banks also often are not willing to credit certain projects or industries, especially those characterized by a higher level of risk.
An alternative to bank loans are bonds. The downside of the bond issue - compared to a bank loan - are higher costs of preparing documentation and legal costs and requirements for issuers. As a rule, interest costs are also larger than the loan. The advantage of the bond is to build relationships with investors, who in the future can buy shares of the issuer.
How to get an investor?
See description of the method of obtaining the investor included in the tab Gaining investor. The material is addressed to entrepreneurs, owners Logging money to grow your business. The material shows the actions necessary to obtain financing from the investor, how to prepare the company for investments that create documentation and how to carry on a conversation with the investor.