For a company to grow, it is essential to have capital available to invest. Having resources to invest in the development of your business will enable you to develop better plans regarding the products and services to be launched on the market.
Furthermore, it will allow improving the infrastructure of the business establishment (including the acquisition of more advanced equipment and technologies), making new hires, expanding the portfolio and exploring new markets.
The bottom line is that many businesses have been hit by the economic crisis battering the country. Because of this, companies often lack resources to invest in business development. Under these circumstances, the attraction of external investments may be a means of company growth.
Where raising funds from third parties is concerned, many entrepreneurs simply don’t know what to do. As such, they usually end up experiencing a lot of difficulty attracting investors. The very first thing that an entrepreneur should have in mind before going out to look for capital should be the types of investments available and how each can help in the development of a company.
What types of investment are available to companies?
The resources employed in a business can come from internal or external sources. Based on this, the amounts arising from investments are called equity or third-party capital.
The first, common to all types of ventures, is that which comes from the company ‘s own partners and shareholders . When a business corporation uses this type of capital, it is using resources associated with its net worth.
Third-party capital, in turn, comes from resources made available by external entities, such as loans and financing. It is related to real liabilities or collectible liabilities, that is, the company’s obligations to third parties. In these cases, the resources must be returned to investors after a period of time.
Now that you know the difference between the two, learn about the types of investment your company can use.
How to attract external investment for your company?
There are many options available. Knowing them is essential to identify the one that best suits your company’s profile. Let’s take a look!
Support lines
These are programs established by the government to promote business and technological development in the country through the provision of financial resources by public institutions. Currently, even some private institutions offer this type of sponsorship.
This is not easy to get at first sight, although this is a great option for entrepreneurs. In order for you to access resources from development agencies, in one way or another you have to show that the project of your company contributes to the development of the country.
Even though there are diverse agencies that offer this type of incentive, the best known are the National Bank for Economic and Social Development (BNDES) and the Study and Project Financing Agency (FINEP).
In its different segments, the former covers the entire economy, being strongly present in the industry, agriculture, services, commerce, and infrastructure segments. In turn, FINEP is dedicated to financing ventures with innovative ideas either in the scientific or technological area.
Bank loans
Financing from financial institutions is also an option for raising capital for your business . However, you need to be careful! Always pay attention to all contractual clauses of the loan, especially the interest rates and payment method.
Researching the terms and conditions offered by each banking institution can help you choose the most advantageous one. In addition to retail institutions, there are investment banks. They typically release a larger amount of capital with better repayment terms, including lower interest rates.
IPO
Also very common in the market, the IPO consists of attracting investors through the sale of real estate securities, such as shares, debentures and subscription bonuses. To obtain resources through this type of investment, the company needs to carry out an initial public offering (IPO ) . From there, it will be able to sell its credit securities.
It is as if the partners were giving up part of the business corporation to sell it to third parties, either by selling shares to brokerage firms or on the stock exchange. As a result, the purchasers of the shares become part of the company’s shareholders. In return, the company acquires money to invest in its development, since its equity capital will increase.
Despite bringing numerous advantages (increased resources, greater equity liquidity, prestige in the market, etc.), going public also has some negative points, for example, the high initial cost of the IPO and audits of financial statements, the need to maintain a board focused on investor relations, the increase in internal control and the corporate structure.
Another thing you need to keep in mind before opting for this type of investment is that new shareholders are entitled to dividends, which is precisely why they acquired the real estate securities. Therefore, this form of raising funds is more appropriate for companies that aim to become large-scale.
How important is external capital for the company?
Any company needs resources to overcome recessions but also to conquer markets. The availability of capital, either one’s own or that of third parties, is what gives a business the ability to invest in its development and maintain itself as a result of being able to find a balance between liquidity, indebtedness, and profitability.
In this scene, exogenous capital becomes a great ally to the entrepreneur, for it seldom has the resources of its own to finance the investments that its growth requires.
External investment makes it easier for entrepreneurs to make plans, especially those related to the creation and development of new projects, the expansion of portfolios and the development of strategies to gain market share, since the availability of capital is no longer a problem. In addition, companies that obtain resources from third parties project a good image and are better placed to acquire other credits.