All Businesses Need Capital
Capital is the lifeblood of a business.? It is true that to make money you have to spend some - and to spend it you have to have it. Without capital you can't buy the equipment you need, lease the factory/shop/office you need or hire the people necessary to help you do whatever it is you do. New capital underwrites innovation and the take up of new technology and the development of new ideas.
It is commonly thought that lack of capital is one of the major reasons for small business failure in Australia, yet access to capital has always been difficult for Small to Medium Enterprises (SME's) and a limiting factor to their growth.
What is equity capital?
Equity capital is the money, time and other assets that the owners contribute to the business.? Generally the originators of the business put in what they can, they borrow against personal assets and work very hard to build the business up
A large percentage of Australian companies are set up under the advice of accountants and Solicitors to save tax and protect assets but the issue of share ownership and share management is rarely discussed.
The use of share issues and share management (equity capital) is a significant business strategy for growth that is understood and used by the big listed companies. Most think that it is beyond SME's, but it is not.? It is a powerful tool that can provide significant benefits to SME's as well ? if you get the right advice and the process is managed properly.
Why raise equity capital?
Does new era baltimore orioles black and orange hats your business have the potential to grow?
What could you do with another $500k?? What about $1 or $2million? Would this give your business the ability to get to the next level? Would that be enough to double the business? Maybe more than that?? If there is this possibility, you should be thinking about how bringing in new investors can help to make it happen. Maybe you can develop that new product, add capacity to the production line, open more outlets, expand interstate or overseas, and build the prototype you've been dreaming about.
Equity capital is not repayable; it demands no provision of security (other than issued shares) and bears no interest. In essence, a business can print its own currency by issuing shares not unlike the way that Barrack new era baltimore orioles black and orange hats Obama and Kevin Rudd are printing money. ??In one sense you can even think of it as being another? product line that you create and sell.
?Where do you get it?
Early stage funding is "relationship" based and generally comes from family, friends, relatives or clients and/or suppliers wishing to firm up their relationship with the issuing company.
Even amongst these groups it has traditionally been difficult to attract investors as there has been little or no liquidity, returns are uncertain and there is often little transparency in the way the business is operated.
A well structured offer however can address all these issues and provide potential investors with demonstrable capital gains, a planned exit strategy, regular company reporting and communications. Couple this with a secondary market platform and many of the obstacles to finding investors disappear.
Corporations Act restrictions
It is illegal for any person (or company) to ask a number of people to invest in a shared business venture, property or other investment without following the fundraising rules set down by the Corporations Act 2001, or without utilizing the exemptive relief such as that provided by an independent ASSOB Sponsor.
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