How companies raise funds?

Publicado: agosto, 2018

How companies raise funds?

The development, growth, and even the maintenance of a business is only possible when financial resources are available. These features may be low initially, as in the case of some companies in the technology sector, as they can be substantially high, as in the case of some industries. According to data from SEBRAE (Brazil), about 1/3 of companies that close are due to lack of capital.

There are several ways to get capital for the business. From the simplest, such as own capital or friends and family, as the most complex, such as bank loans and capital markets. In this article, we will discuss the resources available through the capital market.

In the capital market, there are several means of attracting resources. The most known are:

(i) Debentures

When issuing a bond, also known as Debenture, the company will raise the necessary capital through its issuance, with maturity. The investor will buy these debentures with pre-fixed or post-fixed interest rates. In pre-fixed rate debentures, the investor already knows what his profitability will be. In post-fixed rates, profitability is usually tied to an indexer (some economic index).

(ii) Investment funds (venture capital and private equity)

By choosing to raise funds through investment funds, the business, in addition to obtaining the necessary capital, will also obtain new members, who will bring their knowledge and experience to the company, as well as governance practices that will allow the company to mature.

(iii) Initial Public Offering (IPO)

When the company decides to open the capital on the stock exchange, it needs to have a well-structured long-term business plan in addition to a proven track record of growth. The IPO requires some years of preparation of the company so that it meets the requirements of the Stock Exchange in which it will open the capital.

From the smallest to the largest, from the simplest to the most complex, every business needs capital to grow, and for that it needs good management and preparation. In this way, it can be structured to the point of understanding how much capital needs and what is the best way to obtain this resource. Geld has all the analytical tools you need to indicate the best way for your company to raise and develop.

Author: Paula Stieven Trizotto