Capital Raising, Venture Capital, Business Angels and Private Equity have become flavour of the month in Australia.
The reality is, for businesses looking to raise capital, it can become a nightmare for the unsuspecting owner. You always read about the successful ventures but rarely do you hear of the challenges associated with raising capital for your business. For other business, which utilise business factoring services, it is their opportunity to utilise an alternative solution.
When it comes to capital raising, most business owners believe they have 3 places to go: Banks, Angels and Venture Capitalists. Few people realise there is a 4th way to go if you want to raise between $250,000 and $5,000,000 (without a prospectus).
Below is a snapshot of some of the issues associated with each.
There is a reason they are called Vulture Capitalists. They generally look for small to mid-size companies and traditionally Venture Capitalists will value your company on its current value (prior to growth following funding), and then look to take a stake based on that value. Some Venture Capitalists will also look to play a role in the management of the business. It is a coin toss whether this becomes an asset or a liability.
This path is fraught with problems especially if you are looking to retain control of your business. One business we worked with after the funds were raised through a Venture Capitalist, personal attitudes and business differences surfaced and the owner was forced to leave the very organisation they started.
Business Angels could be ideal for your business if the Angel brings a wealth of experience, contacts or resources to the table but again can also bring the problems you face with Venture Capitalists - you are likely to face with Business Angels. You lose control and possibly a lot more.
Although the most common option for people, you should only really go to a bank if you are desperate. This is why:
§ Do you enjoy putting your own personal assets at risk?
§ Do you enjoy paying interest for the life of the loan? Of course not.
§ What percentage of the company am I willing to offer?
§ How are the shares going to be split up between the current owners and stakeholders?
§ Is your business structure investor friendly, as well as business owner friendly?
§ If you are utilising the banks, are you willing to put your personal assets on the line?
§ Do you want to retain control of your business, or are you happy for a 3rd party to have an influence?
§ Have you put in place a strong management team?
§ How unique is your offering, and what is your realistic potential for growth?
All of these questions are important, and you should definitely know the answers before you approach any organisation to assist you in the funding of growth of your business.
This path offers some unique benefits:
§ The capital raised is interest free;
§ Doesn’t require you to put your home up as security;
§ Allows you to maintain the majority shareholding in your business - allowing you to retain control of the future direction of your company;
§ Allows you to crystalise the value of your business, which is recognised by the markets and considered as an asset on your balance sheet.
Raise capital through a compliance driven platform which is in alignment with ASIC’s rules and regulations. Most people don’t realise the legal mine field and potential issues if you try and do this yourself - and get it wrong. Let me provide some insight: a $20,000 fine, 5 years jail, the company wound up - and then it starts to get ugly from there.
Our focus is to help entrepreneurs realise the aspirations they have for their business!
What this means for you is that your company is able to facilitate debt and equity funding for your business growth, expansion and acquisitions.
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