Capital for business can be acquired through a variety of methods. From traditional bank lines to non-traditional cash advances, businesses can choose to offer up ownership as equity and/or their assets as collateral in order to secure capital (cash).
Equity Financing: When a business uses existing assets to obtain funding it is known as equity financing. The main type of equity financing is done through an underwriter; This is called an IPO. In an IPO, a company sells its shares to an underwriter who, in turn, promises to sell those shares to the public. The shares are basically small parts of ownership in the company. There are two main types of offerings: best efforts offering and firm commitment offering. In a best efforts offering, the underwriter only sells as many shares as it can and is not responsible for the shares that do not sell. In a firm commitment, the underwriter must purchase any left over shares that cannot be sold to the public. The firm commitment offering is the most common in the world of IPO’s.
Debt Financing: When a business sells debentures to investors and must pay them back at a future date, it is known as debt financing. If the company does not like the idea of giving up ownership in their business to get capital for their business, they may choose debt financing. One problem with debt financing is that it must be recorded on the balance sheet as a liability. Until the bonds mature and the business repays the cost of the bond plus interest, they will always have that debt hanging over their head. Some consider it a small price to pay in order to retain ownership control of their company.
This capital can then be used for many different applications including growing your business, buying equipment and machinery, and much more. If your business is to succeed, then business capital is a must. We can help you find the capital that your business needs.