Knowing the Importance of Growth Capital in a Business Cycle - PowerPoint PPT Presentation

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Knowing the Importance of Growth Capital in a Business Cycle

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Title: Knowing the Importance of Growth Capital in a Business Cycle


1
Knowing The Importance of Growth Capital in a
Business Cycle
2
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.
3
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.
4
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.
5
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.
6
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.
7
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