Accessing Equity Financing in Canada
As an entrepreneur, if you borrow money to finance your business you are going into debt right away. In most instances, you will have to repay these loans with interest. Equity financing, on the other hand, allows you to stay out of debt but allows the investor to have a percentage of your investment. In exchange for this, some investors may be looking to have more financial control of your business. This normally depends on the kind of connections and expertise that they bring over to the business.
Thankfully, you can always negotiate the strategic and creative control of your partner before signing the contract. The secret to getting this kind of investment is preparation. In order to do this, it’s important that you prepare a very strong plan to assist you to achieve your ambition without any problem. The investor should know that the business is worth investing in before putting their money. Ensure that you study all the elements before making the final step of committing pen to paper.
What determines the amount of money you pay them?
The amount of cash the investor earns depends on how the business is doing and whether it’s making any profit or not. Normally, equity financing is unsecure, which means that the investor does not have any claim on the assets of the business. Using a combination of debt financing and equity might allow you to access a large pull of money that the business needs. There are a number of equity financings that you can use in Canada. These include venture capital, angel financing, initial public offering among many more.
What to do before going tints equity financing
Before looking for equity financing, it’s important to carry out a thorough strategic business plan of your project. You also need to look at the financial needs and the performance of the business. For instance, you need to ask yourself where the business will be within a few years to come and the plans that you have put in place to make sure that you get there. Most investors will look closely at your business and its financial statements before they can finally commit their cash. This is to ensure that the business will generate enough income within a short duration of time. Your financial projections and plans must show some growth so that the investors are motivated to commit their cash.
More so, investors will also look at your management capabilities to see whether you have the required skills needed to manage the business. They must be able to realize your investment potential before committing their money. They are not looking for a business that is only dominated by one person but rather an enterprise that is managed well. They want to see your ability, a range of skills and experience and solid track record in all the major functions of the business. Some of the potential investors include family members, government corporations, institutional investors and corporate strategic investors. Crowd funding is also another good form of investments that is usually done through the internet.