When you are ready to take the steps to grow your business, you need to determine the funding you can receive to help make it happen. Many different funding options are available, but how do you know which is right for you?
The first method that comes to mind for many people is borrowed funds. There are multiple options for gaining funding through lenders, including Small Business Administration (SBA) loans, traditional bank loans, micro-loans, and online business loans. SBA loans and traditional bank loans typically take months to secure and the repayment terms can run up to twenty-five years with interest rates varying. Micro-loans and online business loans can take less time to secure but they carry higher interest rates than bank loans and may have pre-payment penalties. Additionally, even if you get a loan, business growth is not guaranteed. If the borrowed funds are not used wisely, you can end up paying back money with interest that never helped you make any additional money in the first place, just digging you further into debt.
Another method of funding is retained earnings. This approach uses a combination of operating cash flow and profits left in the business to fund your growth plan. Using retained earnings avoids adding debt and interest payments. You also stay in full control of your company by not involving outsiders in your business. However, use of retained earnings can be a very slow process if you must wait and build up the funds you need. You also run a major risk of not having the finances necessary to keep your company operating from a healthy perspective.
Private equity is a way to acquire funding by selling shares in your company to outside investors. Through this long-term growth strategy, you avoid getting involved with a bank and you minimize your risk. With venture capitalists or angel investors, you also gain the benefit of added expertise and personal interest in the success of the business. One aspect of using equity capital is that shareholders will be expecting a return on their investment. This could result in the consideration of a merger with another company or having the company acquired by a larger company.
Many companies choose to use mergers and acquisitions strategies because the growth is more imminent. Instead of waiting years for the business to grow itself, merging with another company can double the company’s size, reduce competition, and increase profitability. Merging with another business also gives you the advantage of acquiring intellectual property and expanding innovation.
Working with an experienced growth partner such as Benchmark International will help you figure out the best direction for you, whether it is a merger, an elevator deal in which you retain a stake in the business, a cash-on-completion arrangement, or a complete exit strategy. There is a range of options available depending on how you want to see your company transformed. The best strategy will also depend on the state of your company and the current market. It is important that there is careful consideration of the cultural fit between the two companies and a firm understanding of how to manage expectations. Having the right connections around the world in various sectors is also a key attribute you want in your representation because it opens up a wealth of opportunities.
The right partner can maximize value and make your vision a reality for the business that you have worked so hard to build. Benchmark International can be relied upon as a leader in the global landscape to get you the results you deserve.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com
ABOUT BENCHMARK INTERNATIONAL
Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximizing solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.