Raise.Africa

Some companies are structured in multiples, with a main company with different parts categorized as entities that help the core company work better. If your company is structured in this format with different parts, it can be tricky to raise money. In this article, we will discuss how to navigate such scenarios.

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1. Proper Business Structure

A proper business structure is the first step to have in check before proceeding with fundraising. Examine the legal and financial framework of your set-up and how each entity operates independently or symbiotically with another to determine the best way to raise capital while minimizing risks for the company.

2. Explore Financing options

Once your structure is properly established, the next step is to explore financing options available for your company. Debt financing involves entering agreements with lenders with a structured plan to repay according to certain terms and conditions specified by the lender. The lenders could be financial institutions or external sources like private lenders. Some things to consider before exploring this option are the organisational cash flow to help structure the payment plan, the collateral assets, and the risk profile. Debt instruments often explored include bonds, loans, notes, mortgages, and debentures amongst others.

Equity Financing on the other hand involves issuing ownership stakes to external sources in exchange for capital. Financing can be sourced through crowdfunding, venture capital, and private investments. A core essential in this financing method is the impact of dilution to existing stakeholders upon the investment. Some instruments here include stocks, stock options, convertible notes and warrants.

Non-dilutive financing is another method to raise capital without having to issue any additional equity shares or take on debt that would dilute existing shareholders' ownership. This can be attained through grants, crowdfunding, licensing fees, subsidies, and tax credits among others.

3. Investor Relations

When seeking investors, a priority for companies with multiple entities is to communicate clearly and be transparent about your business structure and goals. Give investors a thorough view of how your organization operates, current financial performance and growth opportunities within the market. Prioritize quick information dissemination as well as easy reporting techniques to keep investors informed about what’s going on.

4. Compliance‍

Each operational jurisdiction is governed by its own set of laws and principles. Conduct thorough due diligence to ensure that your entities are compliant with the laws within their market of operations. Some of the things to consider include the type of registration, tax regulations, securities laws, laws governing cross-border transactions, and requirements for corporate governance amongst others. Ensure all these are thoroughly considered throughout the fundraising process.

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5. Risk Mitigation

Raising capital in multiple entities can be challenging but it’s a great opportunity to leverage synergies and mitigate risks. Conduct comprehensive risk assessments to identify potential conflicts of interest and regulatory exposures. Also, implement robust risk management strategies to safeguard your investor interests.

In conclusion, raising capital for your company when you have multiple entities can be a bit tricky but it isn’t impossible. With the right approach, you can raise the money you need to take your business to the next level.

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