debt and equity raises

As a business grows and seeks to expand, expenses generally increase. Sometimes, the revenue the business is already generating can be used to fund the growth of the business, but often that is not enough.

In those circumstances a capital raising is generally required.

There are two (2) main ways to raise capital:

  1. Debt raising; and
  2. Equity raising.

Debt raising

Debt raising is similar to any other type of loan in that money is lent to the business on the basis that it will be paid back on a regular schedule, generally with regular interest payments. Types of debt raising include bank loans, mortgages, over drafts or even credit cards.

Some of the advantages of debt raising include:

The disadvantages include:

Equity raising:

Equity raising is effectively where you sell a share of your business in exchange for funds to grow the business. For an equity raising to be successful, you will have to find people who are confident in the future.

Equity raising can come from family and friends, private investors right up to a public offering by listing your company on the stock market.

The advantages of equity raising include:

The disadvantages of equity raising include:

If you are considering debt or equity raising, you should seek not only legal advice, but also taxation and financial advice from your accountant and financial planners to ensure that you make the right decision for you and your business.

For all legal aspects, contact us today to learn more.