“Money multiplies money” is a belief we may have come across. As a start-up business the seed money which is the initial capital money if self-invested from one’s own pocket gives liberty to function but does not give wings to reach the heights, there comes the necessity to raise funds for the business. Fundraising can be painstaking for a small business where they have no historicity. Injecting money into an already ongoing business need not be a matter of concern but to generate revenue at a state of evolution may depend on various factors. Why should I Invest in this? Needs to be answered, hence there are few guidelines on proposing financial institutions and fundraisers for capital investment in your business.
Nature of Business:
One of the major reasons for investment depends on the Realistic and Practicality of the business. Entrepreneurs often tend to be too optimistic about the future and potential success, end up being unrealistic. Financial institutions clearly scan the sustainability of the business and then process further.
More the capital, better the chance of survival:
The debt-equity ratio of any business should not exceed 2:1, which made vary from industry to industry. It takes a good level of waiting to achieve the breakeven first and then to reap profits. The business should also get breathing space between capital utilized and the final output. Hence the financial planning comes as the crux of the business. Also to manage the interest loans and other capital investment payback has to be taken care of.
“Initial Public Offer” a route plan for generating capital proves to be proven business strategy. Once the business is operational with initial seed capital either owed or from an investor providing returns and a sustainable growth in the forecast, to raise further capital to achieve the forecasted growth and generate value for the promoter for taking the start-up risk and risk of initial capital contribution, IPO can be one of the best options.
It becomes the responsibility of the promoter and the management of the company to generate value for the shareholders of the company. Dividend payout is considered as one of the topmost value generating proposition for any company. A regular and timely dividend to the shareholders is perceived as one of the key factors to lure new investors in the company and generate further value.