News For Busines: Small Business Owners Looks to Raise Capital
Here is some very good news for small business owners looking to raise capital: Capital for small companies can be raised through an arrangement called a “closed corporation” – which is essentially an off-line company formed as a corporation with all the rights and protections of that status and funded by borrowing from private investors. There is no public or personal debt owed to the company, in other words, there is no need to issue credit to finance our operations. All cash assets are owned outright by the owner(s). And here’s the best bit: this arrangement is totally legal and perfectly profitable to all involved. In fact, it is being overseen and co-opted by many current and potential small business start ups; and successfully raised money from hedge funds and angel investors.
Now, back to the point of why this news for small business owners is so good news for small business owners: PE companies can find almost any well-run companies to invest in, even if they haven’t done so in the past! Given the large amount of cash already available for angel investment, and the increasing challenge small businesses have to find enough good deals on the secondary market, if you currently own a business today, you’re duty-bound to start researching your individual alternatives of when and how you could exit… whether you decide to sell or go to a dry powder. As a private equity financier, the best way to increase your cash flow and accelerate your return on equity is to make as much money as possible from growing new businesses. The news for small business is that there is rarely a better investment scenario than starting a new dry powder business.
So what types of new businesses are being established through private equity financing? Well, one obvious choice is the high-end consumer product niche like dry powder or cosmetics. Other types of new businesses being established through PE include medical equipment or dental supplies, but the two sectors with the most opportunities are not apparel or cosmetic, but real estate and pharmaceuticals. Both of these sectors offer an attractive, high return investment, but are growing much slower than the overall economy. This is where seasoned investors would ideally want to put their money – in the place with the fastest growth potential. In conclusion, this news for business is not really “news” per se, but rather the “growth news” for private equity firms looking to raise capital.