How does a corporation raise money

how does a corporation raise money

Things You'll Need

Funds for legal expenses, travel and other costs

Instructions

Determine what type of capital you need. With equity capital, the investors receive a share of your company in exchange for their investment. Early stage companies often use this type of capital because these investors are usually willing to wait a number of years before they earn their return on investment. Established companies with cash flow may be able to obtain capital from a lender that does not receive a share of the company, but requires repayment of the principal and interest over a period of time.

Determine how much capital you need, and where you will spend it. You need to show prospective investors or lender the major categories of expenditures and what you will be able to accomplish with the funds. You might acquire production equipment, increase the size of your sales force, or expand your advertising campaign.

Prepare a business plan. In this document, describe the reasons your company would make a good investment. Show why your products or services are superior to your competitors', why there is a large market for the products or services, and why your management team has the skill to make the company successful.

Assemble a list of prospective investors. Your goal is

to find prospects that invest in companies like yours, meaning your industry and stage of development, and also make investments of the size range you are seeking.

Retain the services of an attorney skilled in financial transactions. Before entering into negotiations with investors, you need to have an attorney on your side who can make sure the proposed terms are fair and that you are in compliance with all securities laws that may be applicable.

Contact prospective investors. Many investors can be reached by email, but sending an executive summary (2 to 4 pages) of your business plan to them by postal mail is also acceptable. Make sure you include a cover letter that is addressed to a specific individual in the firm, so you have a specific person to follow up with about the status of your project.

Make an in-person presentation. If the investors are interested in your project, the next step is to show them your PowerPoint presentation. This covers the most important points in your business plan, and allows them to get you know you as a person. Impress them with your knowledge, enthusiasm and drive to succeed. If all goes well in the meeting, you will be on your way to securing the capital you need to grow your business.

Source: ehow.com

Category: Bank

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