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Choose your financing sources

Is it absolutely necessary for companies to go into debt to grow? The answer is obviously no. To finance company expansion, you can choose to use internal profits or re-injections of cash by owners/stockholders. If you want your company to grow faster, however, the leverage effect of borrowing may be the solution you need. You can also finance or refinance company assets such as accounts receivables, inventories, equipment and real estate using traditional financing vehicles such as term loans, commercial mortgages, an operating line of credit or revolving credit.

If you don't want to or can't increase your company's debt level, there are other solutions available.

Development capital

  • For growth firms whose equity financing needs go beyond the business principals' ability to re-inject funds into the company and whose conventional financing sources are being used to their full extent.
  • Venture capitalists are interested in potentially highly profitable companies.
  • Returns are established in proportion to investment risk. It is the prospect of potentially high gain that makes venture capitalists risk possibly losing their entire investment.
  • To make your project attractive to venture capitalists, growth prospects must be realistic and backed up by verifiable facts. Investors will also want to know about medium- and long-term business projects.
  • In return for venture capital, companies give the investors a certain number of shares which investors hope will increase in value. As investor-partners, venture capitalists take an active part in the strategic management of the company.

Learn more about development capital.

Initial public offering (IPO)

  • For companies needing a massive inflow of capital to support their growth.
  • How it works:
    • The company issues and sells shares of common stock to the public through securities brokers. The stock can be issued with warrants or options.
    • A prospectus allows prospective investors to learn about business activities and financial statements as well as the securities for sale. In Quebec, the Autorité des marchés financiers oversees what information companies must provide to securityholders in the prospectus.
  • Because of the wide array of legal requirements surrounding securities transactions, the assistance of professionals is required to carry out this complex undertaking.

To learn more about IPOs, contact a Desjardins Securities advisor.

Angel investors

  • Type of financing usually used at the beginning of a company growth phase.
  • Angel investors are often retired business executives with capital to invest.
  • They usually invest in projects they expect will have a high chance of success. They become a business partner and are usually involved in the management and development of the business.