Why raise finance for your business?
Findings from the U.S Bureau of Labor Statistics show that approximately 20% of new businesses fail during the first two years of being open. 65% fail during the first 10 years.
Business risk is unpreventable. However, ensuring the right business funding strategies are adopted will increase your company’s success. Raising finance is a critical part of business operations, as it allows businesses to execute the plans it has drawn up, ensuring it doesn’t fall short when it needs them the most. Sustainability and/or Business Growth will come from having the right resources at the right time. Without that, risk of failure will undoubtedly increase.
If your organisation is seeking cost-efficiency and calculated business solutions, allow us to present the Firstbridge guide to raising funding for your business.
Find An Equity Investor
A promising and locally evolving way of raising finance for your company is by seeking an equity investor. In its most basic form, equity investment is the investment of funds into a business in exchange for a share of ownership of that same company. The investors themselves are primarily focused on both the strategic direction the company takes in comparison to its value today whilst focusing on a return that they expect to make over a period of time.
For their contribution, equity investors may receive shares of stocks that can rise or fall in value over a period of time. To balance the risk of investment, an equity investor may also request that the initial investment be paid back after a certain number of years. Ideally, the terms of agreement drawn up by a company and an equity investor be fair to both parties.
Indeed, equity investors can be a good source of capital. The main benefit from an investor is the possibility of gaining more value of the primary amount invested whilst sharing in the risk and reward of the performance of the organisation. What’s more, an equity investor can also diversify a company’s portfolio.
Debt Financing / Loans
Borrowing money from a bank or other institution is another way of raising finance for your business. This traditional method has been supporting start-ups and more established businesses for years, mainly because it was a well-understood practice promoted by local financial institutions. Almost all banks offer business loans.
Now more than ever, securing a loan from the bank can be a challenge in itself. A business needs to comply with many requirements – you need to demonstrate that your company is worth supporting and ultimately the financials of the bank will be sufficient enough to pay off your debt.
Indeed, a bank loan can be an effective way of raising finance for your business, but the process is lengthy and certain requirements will be in store. Naturally the main difference between Debt and Equity comes in the form of risk and reward, so whilst Equity financing tends to share out the risk and reward, through debt financing more often than not the risk remains with the owners of the company and the bank’s return on the financing should not vary whether the company performs better or worse than expected.
Applying for EU Funds
As a country, we are fortunate enough to have a healthy number of EU funded programmes. Funding from the European Union is available to businesses of all sizes in the EU. This includes Maltese businesses, no matter how small they may be. The restrictions are mainly found within the larger entities. EU Funding is ideal for startups, organisations looking to invest in innovative projects or organisations looking to grow their operation through a sustainable and diversified investment programme.
The EU Offers a variety of funding schemes that businesses may benefit from including but not exclusive to:
The COSME Programme grants finance to small and medium-sized enterprises in all phases of their business journey. The granted loans it provides businesses with can rise up to €150K. It offers equity capital in the growth and expansion phase.
The InnovFin EU Finance for Innovators Programme aims to accelerate access to capital for innovative businesses and organisations in the EU. The programme targets projects and entities who find it difficult to gain finance due to their specific nature which may be harder to assess. This programme mostly funds research & development projects.
Programme for Employment and Social Innovation
The Programme for Employment and Social Innovation offers microloans of up to €25K to micro-enterprises as well as investments of up to €500K to social enterprises.
European Structural and Investment Funds
The European Structural and Investment Funds offer loans, equity financing and business funds. An application process will determine if your company or project is eligible to receive this grant.
European Investment Bank & European Investment Fund
European Guarantee Fund
The European Guarantee Fund has been set up to aid businesses after facing the inevitable Covid-19 hit. They ensure that companies of different sizes in the EU have enough capital to keep business activity flowing and recover from the repercussions of Coronavirus.
The mentioned European Union can make a company of any size thrive with the added push it provides with financing. If you require assistance with applying for the right EU fund, contact Firstbridge today.
To boost and support your business by raising finance, Firstbridge recommends a number of solutions. However all are dependent on your organisation’s particular situation and naturally the company’s financing requirements in the short, medium and long term.
The Firstbridge Team is committed to providing clients with practical solutions as well as effective business strategies. Ultimately it comes down to options that can give organisations a realistic game plan. For further assistance on acquiring funding for your business and accomplishing this in the smartest way possible, get in touch with us.
Contact us today to set up a consultation at [email protected].