Just because you’re already running a successful business doesn’t mean you don’t have plans and dreams to make it bigger and better. Perhaps you want to double your sales or expand into international markets. These are worthy goals for a business owner, but the less money you have for investment into this expansion, the more time it will likely take to achieve the results you want.
To grow more quickly than forecast, you could invest in a new product line or even buy out a competitor – but all of this takes money or “expansion capital.”
What is expansion capital?
Broadly speaking, expansion capital is simply money that helps you grow your business. But for the purposes of this article, we will explore expansion capital in the form of an equity investment.
CBGF provides minority equity investments which are a great solution for many medium-sized businesses looking to scale up. Unlike a business loan which you are expected to pay back with interest, an equity investment is where an investor provides capital in exchange for an ownership percentage (e.g., 10%) of your business. The term ‘minority’ refers to the portion of ownership an investor may control. CBGF wants the entrepreneur to stay in the driver’s seat and will only take less than 40% ownership in any business it invests in.
What is expansion capital used for?
Expansion capital can be used to help a business owner invest in several things that can help their business scale up, including:
- Product development – pay for the costs of market research, design, and product testing.
- Increase production capacity – maybe your current production facility has already reached its limit. To increase capacity, you may have to invest in newer equipment or even move to a larger location.
- Sales and marketing – Do you have a great product and the capacity to produce more, but you simply need to get the word out more? Expansion capital can help you hire more salespeople or invest in more effective marketing.
- International expansion – Canada is a great place to do business, but it only represents about 1.2% of the Global GDP. If you feel like it is time to take your business into new markets, expansion capital can help you do that.
- Succession planning – if a major shareholder is leaving the company, expansion capital can help ensure that the company has the finances it needs to continue growing.
- Acquisition finance – sometimes, the fastest way to grow is to buy out a competitor. Expansion capital can help you do this.
How do I know if my business needs expansion capital?
There are several reasons why a Canadian business might seek out expansion capital to help them grow. If this is something you are thinking about, consider the following:
- Do you have goals for your company (such as investing in a new product line or moving to a better facility) that cannot be achieved through your existing resources?
- Do you require capital to improve profitability or market share?
- Are you interested in acquiring other companies but lack the resources and capital to do so?
- Are you willing to give up a portion of ownership in your business? If so, to what degree?
If you answered yes to any of these questions, then expansion capital may be the right solution for you.
Contact CBGF today
Would you like to explore your options for expansion capital in the form of a minority equity investment? Contact us today to get started.