How to Raise Capital for Private Companies

Capital RaisingIn today’s finance world, small companies and private companies have the hardest time raising capital. Large companies or public companies have a wide array of funding options. Private companies have several approaches to raising capital. At start up or at an early stage, most private companies are owner funded or friends and family funded.

Due to the risk of the company at this stage, banks or other financing institutions are not available options. At the point where profitability is sustained and the company reaches a certain revenue size, banks and other funding

institutions become viable options. The key in raising capital for a private company rests in the level of preparation and planning.

Raising capital is a multi-staged process that involves a variety of different disciplines. These include financial analysis, research, communication, solution selling, negotiating, and managing information flow. Most private companies undertake the capital raise process without adequately assessing their state of readiness. For example, a company might have a great growth idea but not have their historical financial statements in order. They might be able to communicate a great story but will have difficulty with providing financial information and managing the information flow.

Once a company is ready, they need to determine the right level of capital raise and the type of capital to be raised. Often companies are penny wise and dollar foolish in the amount of capital to raise. Successful companies ensure the proper amount of capital is available to drive the growth plan, and that the term of the capital is properly aligned with the term of the funding need. Long-term projects need to be funded with long-term capital. The most successful private companies bring on a capital raising expert to help them manage the process. The right M&A advisor can bring a wealth of expertise and know-how to any private company seeking to raise capital.