When businesses need to secure funding, most still look to the bank as their first option. This is unfortunately a flawed line of thinking, and it can lead to even more trouble if a business owner becomes desperate to land necessary capital to complete a project. With that in mind, it’s probably not surprising that some companies seek out private equity financing to help them get out of a jam.
But what does it really mean to receive private equity financing? What’s the true price –– beyond the dollar figure –– that accompanies private equity financing? And where else can you get the funding you need besides at a bank or with a private investor? We’re here to answer these questions and more:
Private Equity Financing 101
In simple terms, private equity investors are individuals or firms who invest capital into a company in return for a percentage of a business’s sales. In some cases, private equity investors may even buy out public companies so as to gain complete control of them. For a long time, private equity investors only did business with multi-million-dollar companies.
Only recently have they expanded into small business financing.) Some businesses prefer courting private investment rather than trying to get a loan from the bank because they feel that private investors will allow for greater flexibility.
After all, they reason, with private equity financing they don’t have to pay back interest, or monthly rates to the bank. And they can use their new capital on just about anything to improve their business. However, private equity financing has a number of downsides that too many business owners overlook.
The “Real” Cost
In truth, private equity investors are a great deal more invasive than bank ever could be. That’s because when you invite private equity into your company, you concede a crucial element of running a small business: autonomy. Private investors want a return from your business –– and they’re willing to exert their influence to control how your business functions.
Remember, while you’re shouldering the burden of expenses and fighting the day-to-day battles for your company, private investors won’t hesitate to take their cut. Also, they’ll likely stipulate how they want their money spent within your company. Additionally you won’t be able to properly grow your business if you keep losing a substantial portion of your profits to private investors.
The Alternative to Your Funding Needs
If you feel stuck between a rock and a hard place when it comes to dealing with banks and private investors –– we feel your pain. The good news is, you’ve got options beyond them. Alternative lending sources can give you the flexibility and capital you need without the stress of dealing with a bank or bearing the millstone of private investment. No matter what your business does, there’s a specific financing option that’ll work perfectly for you.
The Bottom Line
Having trouble securing a financing option that won’t bleed you dry? If you’ve ever felt marginalized by a bank or private investment group, we’re here to help. Contact the National Business Capital team today! Our passion is helping businesses like yours grow and flourish.
And for more information on what a little extra capital can do for your business, download our free eBook here.