Growth Capital searching can be a frustrating process, a seemingly endless path with a lot of rejection. The headlines in the local newspaper make the process of how to get growth capital for your business sound overly easy. Usually, the story line talks about an entrepreneur in need of growth capital and how he eventually connected with a funding source. Usually omitted from these success stories are the months of effort and knocking on doors that preceded it.
The real world answer to the question of how to get capital for your business is - through using a proven capital raising process. This process must do several things. First, it must decide on the best form of capital for your need. There are numerous forms of capital in the market - bank loans, mezzanine loans, equity investors, angel investors etc. Each of these different forms has positives and negatives which should be fully understood. Second, this capital raising process should determine the ideal amount of the funding. Often, businesses underestimate how much money is needed to execute their growth plan.
Third, prepare your financial statements and your growth story. Lenders cannot do much with companies that have sloppy or incomplete financial statements. Quality financial information and descriptive information about the history, customers, products, industry and management team are needed by the lender. In order to get growth capital, lenders want to see a level of sophistication and professionalism in the company. The fourth important element in getting capital is having a strategic growth story. Lenders want to know what you will do with the money and how you plan on growing. In order to help the company manage these steps, it pays to bring on an M&A advisor.
These professionals will help guide you through the decision steps and various stages of preparation. Once everything is in place, the official capital search process begins. The M&A advisor will have a confidential information memorandum on your company and a list of funding sources to approach. Funding sources have different criteria such as deal size, deal type, industry and location. It is important to focus on funding sources that provide capital on a direct basis to companies. Often, the deal preference of a lender prevents it from lending directly to non-private equity owned companies.
This is to say, mezzanine lenders, a popular type of lender, often will only fund companies that are owned by a private equity group. This makes the growth capital targeting process even more important. In short, there are multiple steps and requirements to securing growth capital for your business. For most mid-sized companies, an outside advisor is needed to organize and lead the process. The pay-off to this process is considerable though. Growth capital can transform your business and dramatically increase the value of your company through allowing you to make acquisitions or grow at an accelerated rate. So in short, the answer to the question of how to get growth capital for your business is - secure the representation of an M&A advisor to manage the process.
About Attract Capital, LLC Attract Capital is a financial advisory firm dedicated to the growth of mid-sized companies throughout the United States and Europe.