As your business grows, it will require additional capital to fund expansion. Business owners need to step away from the business and think about financing options for their business. Corporate finance advice along the business journey is critical and we can provide independent legal advice to help you achieve your desired outcome.
The 2 key financing options are (i) equity and (ii) debt. Businesses can choose one or the other or a combination of both.
Equity financing is the raising of capital through the sale or issue of shares in a business. Equity can be sold or issued to third party investors with no existing stake in the business. Alternatively, equity financing can be raised solely from existing shareholders through a rights issue so as to avoid diluting ownership or control of the business. Examples of “external” equity finance include seed finance, business angel investment, equity crowdfunding, venture capital/private equity investment and an IPO/public offering. There are numerous legal and regulatory requirements to comply with depending on the option chosen and we are happy to advise on these requirements and supporting legal agreements.
Debt financing is an arrangement between borrower and lender. A capital sum is borrowed from the lender on the condition that the amount borrowed is paid back in full either at a later date (a bullet repayment), multiple dates or over a period of time. Interest is accrued on the debt and the business’ repayment usually comprises an element of capital and interest. Unlike equity, debt does not involve relinquishing any share in the ownership or control of the business. However, security (over business and/or personal assets) will likely need to be offered to the lender.
There are 3 broad categories of debt:
Much of the legal documentation will be on standard lender terms but the lender will have strict requirements to require the borrower to obtain independent legal advice on the loan and security documentation which we can assist you with.
The specialist lawyers at Neves have extensive experience in assisting clients with business financing. Contact our Company Commercial team on 0330 0945 500, email email@example.com or complete our Contact Form and we’ll get back to you.