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.