You’ve probably heard the term ‘leverage’ in connection with business, but you may not have understood exactly what it means. It actually refers to the method by which a business acquires resources, either for expansion or to launch a startup. It generally means that a business has borrowed money in order to finance the acquisition of assets needed for conducting business. Another way that a business can be leveraged is to exchange equity in the business itself for money supplied by investors. Here’s how leveraging your business can help you achieve real business growth.
Equity financing can be a powerful tool used to fuel business growth. One way this might be used is when a company’s management team or Board of Directors authorizes the sale of stock to investors. This will generally trigger a large influx of cash which can then be used for the purchase of assets needed for growth. There is a number of other ways that equity can be used to leverage business growth, and some of them can be fairly creative. As an example, your company might be able to capitalize on its good reputation by raising money through franchising. If your brand is a powerful one, you might want to license your brand to other restaurants, or you may want to franchise out your most famous recipe for use by caterers.
Leveraged buyouts occur when one company’s assets are completely absorbed by a second company, often one which is smaller than the original. There is generally very little money used as a down payment for this kind of purchase since it assumes that the assets themselves will immediately trigger a positive cash flow for the new company buyer. This can work out very well for both companies, although there is some inherent danger of course if strong cash flow is not immediately generated.
Trying to grow your business?
If you lack the funding necessary to help grow your business, we may be able to provide the financial assistance you need. Contact us at Norris Commercial Capital, so we can consider some options for funding the next phase of your business growth.