How can my business raise more capital?
Does your business need capital to fund its day-to-day operating expenses or a significant expansion? Here’s a quick look at the types of capital your business will need to raise and how you can get capital financing.
1. Working capital financing
Working capital financing refers to funding from the remaining revenue after your company has paid all its debts and obligations. You’ll need working capital financing for your SME’s day‐to‐day operating costs such as rent, inventory and supplies – as well as paying for one‐off costs such as new equipment.
Some small tweaks to the way your business is run can go a long way in helping your business boost its working capital. For starters, it’s important to review your existing debt obligations and refinance the debt obligations, and to reduce costs associated with high interest rates, or to lower monthly payment obligations. It is also a good idea to review your billing practices – be sure to invoice your customers once products or services are delivered, to encourage them to pay on time.
2. Debt capital financing
Debt capital financing is funding that your business obtains through a loan or line of credit. Though loans and credit can be used to pay for day‐to‐day operating expenses, debt capital is usually used to finance investments that will directly generate income for your company, such as expansion that will allow your business to become more profitable, and development of new products that provide additional revenue streams.
If you are planning a significant business expansion, you might need to consider a loan to take advantage of business opportunities that only come once. These include term loans, personal loans, revolving lines of credit or even credit card debt.
3. Equity capital financing
Equity financing is the process of raising capital by selling your company’s shares. SMEs might raise capital this way to fulfill short term debt obligations, or to fund their long‐term plans. By raising money this way, companies sell a stake in their company in return for cash. Small businesses often raise equity capital by selling shares to friends and family or other private investors.
If you plan on raising capital by selling equity, it’s important to craft a detailed business plan and presentation to explain how potential investors will stand to gain. Keep your materials succinct, but be sure to include all key information such as a cleanly‐written executive summary, why your business is a great investment opportunity, how you plan to execute your plans, as well as all key information about your management. Have your financials at your fingertips and be prepared to answer tough questions. If your prospective investors like what they hear, speak to a lawyer about drawing up the necessary business contracts.
Does your business have a pressing need to raise more capital? Speak to a DBS relationship manager today about our different business loans, lines of credit, fixed asset financing and more. Get more tips on funding your business at DBS BusinessClass.
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