The Right Corporate Structure Raises Money

Why is getting the right corporate structure so important for raising capital?

A large number of businesses fail as they are unable to raise the necessary capital to operate and grow their business.

Without sufficient capital to manage the day to day operations of a company a company is more likely to fail. Even if a company is viewed as an attractive investment for debt and equity providers it will not be able to raise the necessary debt and equity without the appropriate platform making it ready for investment.

There are a number of corporate structures and different investors and debt providers structure their investment and lending criteria to meet their preferred structure.

For example Sue may be looking for long term capital growth and be willing to take a lower dividend in order to achieve the capital growth. Bob on the other hand is interested in a immediate returns and is willing to accept limited capital growth. In order to attract each of these different investors the right company structure is imperative.

In relation to debt financing some financiers lend money with a high interest rate and are willing lend to business perceived to be of a high risk or have only been in business for a short period of time. Other financiers will have less appetite for risk but charge a lower interest rate.

Your capital requirements and the return on capital will depend upon your business objectives and how you use capital. The matching of investors with funders is a crucial part of ensuring the relationship is beneficial for both parties.

Without the right corporate structure meeting both parties needs can be very difficult. There are a number of options.

For example a property development group may want to bring a number of investors who are happy to share the development risk and wait two years for a return on their investment. This type of investor may also be looking for the taxation benefits not offered by other types of investments. A manufacturing company wanting to raise capital to expand its operations by acquiring a competitors business will attract a different type of investor. This investor may be looking for a quick return on their investment and by buying shares in company prior to the acquisition they would be expecting the shares to go up after the acquisition is complete.

Establishing the right corporate structure to raise capital is a complex. It is important to ensure the match right between investor requirements and business needs is carefully considered to ensuring prosperity and growth.

Helping steer your business to growth and prosperity

Are you a medium sized business looking to expand and grow but need access to capital to achieve your objectives.

To determine the most appropriate structure for your business we at CL King and Associates work with you through the following steps.

• Where is your business today
• Where do you want your business to be tomorrow
• What are your short, medium and long term capital requirements
• What is the optimum corporate structure for your business

We at CL King and Associates offer a range of corporate advisory services to assist your business restructure and become investor ready.