Kim Inglis: Investment adviser and portfolio manager, Canaccord Wealth Management
Raising capital in the equity markets is one way of expanding your business. It provides the funds necessary to move your company into the next growth phase and offers a means for securing ongoing capital through subsequent financing rounds. The added liquidity helps the company in valuation terms and can potentially improve brand value by enhancing the business' overall profile. And you can gain from the business expertise your investors bring.
Raising capital is an eye-opening yet enlightening process. It is quite intensive, but it can help your long-term success because it forces you to analyze your business plan critically and get it perfect. A corporate finance group will not consider you unless you've got a comprehensive business model, complete with detailed financial projections and revenue models.
Your management team must have the expertise to help you hit your targets and ensure proper execution of processes such as cash flow. And you must show you have the drive to put your plans into action. If you cannot, you will have problems attracting investors.
Raising capital is an important decision requiring careful thought. How much are you prepared to give in return for the investment? Does it involve seats on your board or hands-on participation? How long will the arrangement last and how is it concluded? The more questions you consider and resolve, the better equipped you are to get a good deal. You might also consider using an expert to help you.
At the end of the day, additional capital can help launch your business to the next level. The devil is in the detail, so it's important not to focus solely on the capital itself. The focus should be on ensuring funds are allocated to fully maximize your business plan.
Nathan Waters: Director of operations, Small Business BC
Financing your business expansion is all about finding the lowest cost of capital possible.
Because interest rates are low right now, banks and credit unions are one of the best bets for expansion funding, as long as you have positive cash flow and are not currently overleveraged.
If you're looking for a small loan, you may find that microloan programs at credit unions like Vancity are perfect. In addition to your credit score, they tend to also look at your contributions to the community.
While seeking financing, however, be careful how many credit checks you receive; your credit rating can take a hit if you have too many.
If you are overleveraged on the borrowing side or you have a poor credit rating, then your best option could be equity financing or personal loans (a.k.a. love money). Equity financing is great for those who are expanding into an area where they lack experience. Bringing on partners with the right skills can be the key to successfully expanding your business while also providing you with financing.
A third option it to research the availability of government and NGO funding opportunities. Visit www.canadabusiness.ca and use the search tool in the financing section, but keep in mind that this can involve a lot of time and work to find funding that's right for your business.
Finally, research the costs associated with the different forms of financing that are available to you. Look at all of your options and how they affect your cash flow before you make a decision on the type of financing that's right for you.
Chris Catliff: President and CEO, North Shore Credit Union
It is essential to first examine your operation with a detached, objective internal and external view. Behavioural finance teaches us that emotion often plays a significant role in decision-making and emotion can be both good (passion and drive) and bad (excess personal belief in our product or market).
You must start with a plan. Document how and what you want to achieve by developing a thorough business plan, which includes pro forma cash flow, balance sheet and income statements with various scenario sensitivities. Confront current realities fully through a SWOT analysis. Think about production capability, personnel, market and economics. Building a plan can be a complicated and exhausting exercise and may require the assistance of external advisors.
You will also want to review corporate structure and evaluate how assets are held. Are they held through an operating company, holding company, family trust? Does the structure optimize tax minimization, ensure legal protection and cover succession planning?
Outline where your capital needs will be. Is it for daily working capital or for fixed costs? Different needs may lead you to different lenders.
Seek out options. These will include banks, equity investors, angel investors or family. Remember this will be the start of a partnership, so choose an investor that you can work with now and in the future.
Now it's time to execute the business plan. Consider your brand awareness, audience and online presence. Review your product and service development.Find ways to improve efficiencies by reducing waste and increasing efficiency of production operations.
Expanding your business means it's really working! But you must monitor progress continuously.
