02 Mar Raising "Ongoing" Money Through the Public Markets
There is no shortage of discussion on the world wide webs regarding how difficult it can be to raise capital for your business. If you’re into the new sexy of crowdfunding or even into traditional private placements, you’ll certainly always recognize the need for capital raising. Here are just a few areas in which having easy access to capital can not only help in business growth, but will help to ensure the business doesn’t die on the vine.
- Initial start-up funding for operations and new hires
- Equipment purchasing and leasing used in the production of a product or the facilitating of a service
- Bolstering inventories (both raw and finished)
- Financing of growing receivables
- Expansion–sometimes regional–of ongoing operations
- Administrative support, including management assistance and central-office build out
- Research and development of existing products, market and growth opportunities
- Exhaustion and retirement of corporate debt
- Increase market share through sales and market expenses
- Increase influence, growth and market share through mergers & acquisitions
The objective of raising capital is to facilitate many of the aforementioned necessary components of a business. However, as companies morph–and many a company will greatly morph away from their original plan–the need for adjustments and further, on-going capital will be necessary.
One of the greatest benefits of going public is the ability to tap the public markets for funding more regularly. A perfect scenario of a company who is not ready to go public is one that only requires a single financing event. Perhaps they only need capital for the purchase of some real estate or equipment. When this is the case, a public offering is likely not the most effective option. Going and being publicly-traded most benefits companies that need on-going and regular financing.
We often receive inquiries from private businesses that want to go through some of the expense of going public, but who may need to be public for just one capital raise. This is often not the most efficient option for any company. If a company doesn’t need stock as a bargaining chip, public valuation accretion or the option to raise follow-on financing through PIPEs, then being public may have too much cost to the private company.
Keep in mind, public offerings are a great way for companies to raise money that regularly need money. In addition, being public makes getting the money that much cheaper (in spite of the regulation). Anyone who has ever factored their receivables knows what I’m referring to. So, if you need ongoing and regular money, being public is a good (but admittedly not the only) option.