Questions to Ask When Raising Money to Start or Grow Your Business
Businesses require capital or money to run and get off the ground. Once established, a cash infusion may be the only way your business can grow and obtain new customers or markets. When it comes time to raise money to start or grow your business the first step is to determine your comfort level with risk.
Are You Comfortable With Risk?
Depending on the structure of your business, protection of individual assets, is always an important consideration when forming or growing your business. Individuals who start a business want to keep their personal assets and minimize any risk to their investment assets. The goal of any business however is the pursuit of profit for gain or reinvestment.
Who Are Your Investors?
There are two general categories of investors. Many companies have a combination of both. Consider whether your investors are flexible and looking for long-term gains or whether they are looking to cash out quickly and only seek short-term gains. Requesting additional funding from your existing investors may come with strings attached. Look to your original agreements for direction on raising money from new investors.
What Business Financing May Be Available?
Once a business is established financing may be available to provide the business with a loan to purchase equipment or real estate for example. Many of these loans would require putting up personal or business assets as collateral in the event there is a default.
How much of your personal money should you reinvest in your business? Capital to expand and grow a business will most likely dilute your shares unless the cash infusion comes from your pocket. Original investors may want to increase their shares in the business in order to participate in additional rounds of funding. A new investor will most certainly dilute your original shares in the business. Consider how much of the business you need to own to continue to make decisions on how your business should operate.
Should You Share Strategic and Operational Decisions With Others?
If your business structure is a corporation, you already have a board of directors. As the business grows additional members may be added to provide expertise and guidance relating to the company’s core of future business. Capital infusions often come with a new board member. An investor, whether an individual or company, may want to participate in decision making.
The corporate lawyers at JGPC law provide advice and counsel to businesses looking to raise money to start up and grow.
If your business is contemplating raising money to expand and grow JGPC law is available to help. At all phases of the funding process and at every stage of a business, JGPC Business Law serves businesses in Fremont, Hayward, Oakland, Tracy, Manteca, and San Ramon from our Pleasanton and Livermore California offices grow. Visit us online to request an appointment today or call us at (925) 463-9600.