Why Private Equity Might Be Right For Your Business
When it comes to growing your business, there are always important decisions to be made. Most companies at some point in their life need to access funding to facilitate their growth. Although most business owners consider traditional bank loans, private equity is becoming an ever more popular option, so could it be the right solution for your business?
What Is Private Equity?
Large multi-national companies that are floated on the stock market are referred to as public companies. These companies issue shares that give the purchaser of these shares part-ownership of the company in return for money. Private equity follows a similar concept: the investor is purchasing a stake in the company, but in this scenario, the companies are private companies that are not listed on the stock market.
Why Do Investors Choose Private Equity?
An investor’s primary objective is to maximize their return on the money they own or are managing. They aim to identify private companies that they feel can grow exponentially and deliver excellent returns.
Why Are The Advantages To A Business Owner of Private Equity Rather Than Traditional Finance?
There are many benefits to a business owner of investigating the private equity option. Provided the business owner wants to retain a majority stake in the company, then the three biggest benefits are, investment for expansion capital, recapitalise a struggling business and de-risking.
Investment In Expansion Capital
Looking from the outside in, it is easy to assume that the owner of a successful business is in an excellent financial position and has the capacity to invest further in that business should the need arise. Unfortunately, the reality is often very different. Many business owners, even those where business is booming, can often be financially stretched to their very limit.
They might have already utilized every personal and business asset as collateral to obtain bank loans. Even though there is huge potential for growth, they cannot obtain the funding needed to facilitate that growth. Private equity funding can help alleviate that issue and provide business owners with the necessary capital to finance growth.
Recapitalise Businesses Which Are Struggling
Just because a company might not have a healthy balance sheet, it doesn’t mean that the business’s potential is not huge. There are specialist private equity firms which deal with such businesses and provide the management team with funding and knowledge to help turn the business’ fortunes around.
Quite often, the owners might feel they’ve worked really hard and have built up a business which holds considerable value and while they still feel passionate about the business and want to continue expanding it they might want to de-risk by selling a minority share in the business and “taking some money off the table”. This helps to ensure their personal financial security and they can get back to growing the business with peace of mind.
If your business requires additional investment, but you would prefer some level of private equity funding rather than a traditional bank loan, then contact us today on 0333 772 6165. We have worked on many private equity deals in the past and could help to find the perfect investor for your company.
We look forward to playing a pivotal role in helping your company continue on its upward trajectory.