Essential Guide to Debt and Equity Raising for Sydney Businesses
If your burgeoning company reaches the point where debt and equity raising become essential, it can be both daunting and exciting in equal measure. Securing the debt you need or being forced to release equity to finance growth may mean the difference between the success and failure of your venture. That’s why we always recommend engaging the services of reputable financial planning advisors in Sydney, like MGB Accountants, to give you the advantage rather than constantly trying to progress from the back foot. Choose to partner with MGB Accountants, and you will not be disappointed with the results. We are proud to offer in-depth equity and debt capital raising advice in Sydney and beyond, including:
Exploring Debt Capital Raising Strategies in Sydney's Dynamic Market
There are established ways of raising capital, some based on the transference of equity, others on debt accumulation, and yet more on risking your own or other people’s money. Eight typical strategies for raising capital in the dynamic, aggressive world of Sydney financing include
Bootstrapping — A company is started using the owner’s funds that they hope to recoup and reinvest to grow the business. A solid strategy not relying on the funding of others to get underway, it can be among the more stressful, financially crippling ways to proceed. This is especially true if initial predictions fall short and unexpected funds are required. A significant positive aspect of bootstrapping is that it does not require raising debt capital or sinking the company into a hole before it starts.
Crowdfunding — Donations from members of the public raise the requisite business capital. It is generally accepted that the donors will receive a portion of the company’s equity in return for their initial outlay. Again, no debt raising is required, and the company can start on an even keel, but the pressure of shouldering the financial burden is now shared among a much larger group.
Grants and competitions — Some states may offer business grants to incentivise new businesses and larger corporate concerns sometimes create competitions to encourage new startups. Watch for tempting opportunities and strike early, as competition can be fierce.
Business loans — The traditional method of debt raising, business loans, are still the preferred route of many start up businesses today. The advantages are that the bank will ‘have your back’ and do what they can do to advise and assist you on your journey. However, you can expect restrictive interest repayments to mount quickly once you have jumped through the requisite hoops.
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Partnerships and corporate sponsorships — You might be able to persuade other businesses to sponsor your growth and offer financial support and advice. Whether they do this out of the goodness of their hearts is debatable and contingent on any deal you can strike with them.
Revenue-based financing — Investors provide the capital you need in exchange for a percentage of your company’s total gross revenues ad infinitum.
Vendor financing — A form of debt capital raising in which the company you wish to purchase products from effectively lends you the money to do so. This is done on the premise that they own a percentage of your business, similar to how revenue-based financing operates. It can be helpful in the early stages of growth but expensive and restrictive as time passes.
Invoice factoring — A method of raising debt capital whereby a company turns its outstanding invoices over to a factoring specialist. They release a small amount to you once the invoice is received and the balance (minus their fee) when the customer settles the total amount.
Navigating the Landscape of Equity Financing in Sydney
MGB Public Accountants is the leading provider of Business Valuation Services for businesses in Sydney and offers accounting services for all aspects of your financial dealings, including:
- Business tax planning services
- Small business tax return accounting
- Managing employee benefits
- Payroll Reconciliation
- Taxation services
- Superannuation compliance
- Bookkeeping services
- Business activity statement (BAS) accounting services
MGB Public Accountants have all the experience and expertise your company needs to safely navigate the bewildering waters of debt and equity raising. We also have an excellent support team who will discuss every angle of your financial situation and give you more information on the pros and cons of raising capital equity vs debt.
Contact us
If this all starts to feel overwhelming, fear not; the team here at MGB Public Accountants is here to help. Reach out and contact us at your earliest convenience, and we can discuss your exact financial position with you in detail and offer open, honest advice. We also have a section dedicated to frequently asked questions, so please head over and browse to see if your questions might already have been addressed.
FAQ
Equity & Debt Raising
Equity financing includes no obligation for repayment but gives part ownership of the business to the investor. Debt raising requires no ceding of ownership.
The instant influx of cash is the main selling point of any debt capital; however, it has some added tax benefits since it is a business loan. Certain tax deductions (fees, charges, and interest) can be claimed.
MGB Public Accountants are here to help and guide you, so why not get in touch today and let one of our knowledgeable advisors help you determine the right balance of debt and equity financing to strike?
Put simply, you will require a Share Subscription Agreement or SAFE Note (Shareholders Agreement for Future Equity) if you want to pay back your debts in the form of equity and a Convertible Note for straight debt raising. For further details, please get in touch with the team.
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