Knowing the Importance of Growth Capital in a Business Cycle

Most often a high-growth and mature companies look for funding to increase their profit, to expand, to restructure operations through organic approach, to enter new markets, or to finance a significant acquisition without a change of control of the business. These companies seek for growth capital to finance a major transformation of their business. 

Growth capital is a form of private equity investment in a late-staged level of a business life. Financial institutions tend to provide this capital to businesses who are able to generate revenues and operating profits, and to those companies who have already reached a stable point where they are capable of exploring opportunities or expansion but unable to generate sufficient funds.  Financial firms who provide growth capital support businesses that have market leadership potentials.

Growth capital is also known as growth equity and expansion capital. It exists at the intersection of private equity and venture capital and it is provided by a variety of sources. Companies who seek for growth capital are likely to be more mature than venture capital funded companies because they have already established their revenues that are already proven in markets or industries. Because of insufficient funds these companies generally can find alternative conduits to obtain capital for growth and expansion. 

Growth capital is often structured as either Common equity - a type of capital used to directly absorb losses; or Preferred equity - a measure of equity which only takes into account the preferred stockholders, and disregards the common stockholders. While other investors also use various Hybrid securities that include a contractual return such as interest in payments, in addition to an ownership interest of the company. Hybrid securities are group of securities combining debt and equity, the elements of the two broader groups of securities. It behaves more like fixed interest securities while others behave more like the underlying shares into which they convert.

There are numbers of dedicated growth equity firms around the United States that can provide the financial needs of your business development. The amount of capital that can be produced would range anywhere from $2 million to $100 million, depending on the firm and whether they would take a majority or minority investment in your company. Since this type of financial service involves a great amount of capital, therefore it is best to partner with financial firm who have time-tested and battle-hardened fund raising techniques, who do not just provide you financially but coaches you as well, and most importantly, who delivers service with the highest sense of integrity.

How to Apply for Startup Loans or Seed Capital After your Bank Declined

So your bank declined after complying with all the requirements necessary in applying for a startup loan? It is very discouraging when after all the efforts you have invested in and the time consumed of securing all the documents needed, you were still rejected by your bank. This loan rejection could affect your business lines of credit for future business loans. But do not take it personally because there are always challenges when going through the business loans application process. Try to stay calm and find out why your application was not approved.

It is imperative to know and understand why your loan application was not approved by your bank. Most of these financial institutions would not go through the details as to why your application was declined because they are afraid they might be offending you, but knowing the reasons why can be crucial to your business success and it can be very helpful in your subsequent business loan applications. You may ask your lending officer politely and tell him that you understood why they would not be able to help you; however, you need to know the reasons of their disapproval in preparation for your next loan application.

After being turned down from your local bank, stay calm and do not lose your hope. The rejection of your loan application may only reflect the financial health situation of the bank, perhaps the bank is not really in good financial shape and are only offering loans to their best valued customers. But it does not mean that you are not one of their best valued customers, perhaps these clients are their loyal customers who have been in business with them for such a very long time. If you have been their client for such a very long time as well, perhaps you were the last one to apply.

There are few best options left for you in acquiring startup loans or seed capital for your startup business.  Your best solution is to look for a financial firm that offers unsecured business loans which do not demand for many requirements unlike your local conventional bank. It is best to partner with this type of unsecured business financing firm who understands your financial needs and helps you obtain unsecured business lines of credit.

There are angel investors network as well that can provide you seed capital that eliminates unnecessary applications which could also have resulted in disapproving your previous business loan application. This network of investors may help you analyze your business plan, offer essential coaching for entrepreneurs seeking to raise venture capital, and will work with you to accomplish your goals. Partnering with angel investors for your startup business enables your business to succeed and they will continue to help your existing business for future expansion. 

There are several financial institutions other than banks where you can obtain business funding for your startup business or business expansion. If you are not familiar in your area, you may search on the internet and apply through online, or you may call their hotline numbers and they would be happy to assist you with your financial needs.