How Do You Finance A Small Capital Business Using The Stock Market?
One of the primary functions of the securities markets is to make it possible for an investor to be able to buy and sell investments in commercial enterprises. Without this market liquidity, companies would have a very difficult time financing their start-up and ongoing operations. In addition to offering stock, small-capital public companies can raise money in other ways by using the market. Use your company’s stock as collateral for borrowing. You will have to issue new stock to the lender (reducing the value of the shares held by your existing investors), pledge treasury stock, or pledge stock owned by members of the company management team. Pledging officers’ stock or treasury stock does not dilute shares held by existing holders because no additional stock is issued. Sell shares of your stock to accredited and institutional investors at a discount to the current market price.This is known as a PIPE offering (private investment in public equity) and often results in a decline in yo
