introduction to raising finance

[neha1986]

When a company is growing rapidly, for example when contemplating investment in capital equipment or an acquisition, its current financial resources may be inadequate. Few growing companies are able to finance their expansion plans from cash flow alone. They will therefore need to consider raising finance from other external sources. In addition, managers who are looking to buy-in to a business ("management buy-in" or "MBI") or buy-out (management buy-out" or "MBO") a business from its owners, may not have the resources to acquire the company. They will need to raise finance to achieve their objectives.

There are a number of potential sources of finance to meet the needs of a growing business or to finance an MBI or MBO:

- Existing shareholders and directors funds
- Family and friends
- Business angels
- Clearing banks (overdrafts, short or medium term loans)
- Factoring and invoice discounting
- Hire purchase and leasing
- Merchant banks (medium to longer term loans)
- Venture capital

A key consideration in choosing the source of new business finance is to strike a balance between equity and debt to ensure the funding structure suits the business.

[smith360]

There are many traditional sources of finance such as your bank or wealthy private investors looking to put cash, and sometimes their own business knowledge, into a fledgling enterprise (this type of investor is called a business angel). However, these options are not always suitable, particularly if you have never traded before and may not have a credit history. Great writing !

[Michael01]

You are right . There are several sources from where finance can be raised by the company . But, there must be a balanced approach in choosing them. Thanks for such sharing.