Small Businesses Need Capital

Small businesses are essential to the economic well-being of a country, but unfortunately, many find it challenging to obtain the capital they need. This is especially true in times of economic hardship and uncertainty when small businesses often lack access to traditional financing options and cannot afford the high cost to access the public markets. Fortunately, private capital markets have emerged as a viable and advantageous solution for small businesses to raise the funds they need to grow, sustain jobs, and contribute to their communities.?

Raising Capital is Expensive

Small businesses are often faced with tedious and expensive processes when trying to?access traditional capital sources . Raising capital for companies?when going public compared to private ?can be expensive and complicated. The costs associated with this type of fund-raising include:

• Underwriting fees
• Exchange listing fees to launch on the stock exchange or other public markets
• Professional fees for attorneys, accountants, and other financial advisors
• Printing and distribution costs for prospectuses and registration statements
• Costs associated with filing regulatory paperwork such as the SEC Form S-1

These costs can be pretty high, making it difficult for small and growing companies to afford them. The process of going public is also typically long and complicated, requiring a great deal of time and energy from company founders. In addition, many banks impose strict guidelines limiting the amount of capital small business owners can borrow. This makes it difficult for businesses to obtain the necessary funds they need to grow and succeed. For small startups especially, the possibility of going public is usually not only years away, but a distant dream. For organizations that need to raise capital more immediately, the private market is a much better option than raising capital publicly.

Tough Times for Startups

During times of economic uncertainty, small businesses often have difficulty obtaining the capital they need to stay afloat. The pandemic has had a particularly severe impact on startups and small business owners who are struggling to keep their businesses running. Many have been forced to lay off workers and cut costs, making it even more difficult for them to access the necessary capital needed to sustain operations. For companies just starting out, access to traditional financing sources is often limited or nonexistent.

The Solution: Private Capital Markets

Fortunately, private capital markets provide a viable solution for small businesses during tough economic times. With private businesses able to use JOBS Act regulations like RegA+, RegD, and RegCF to raise millions in capital from accredited and nonaccredited investors, they can tap into a variety of potential sources of financing that may not be available through traditional lenders. The cost of raising capital privately using JOBS Act regulations compared to taking a company public is significantly lower. This is because:

• Companies don’t have to incur the significant costs associated with going public due to reduced reporting requirements. However, investors are still protected by securities regulations and compliance measures that must be followed to raise capital.
• Private capital markets enable businesses to bypass the lengthy legal process involved in taking a company public, thereby allowing them to access the funds they need quickly.
• Private capital markets offer more flexibility than traditional financing sources, allowing businesses to craft more creative and advantageous terms for the capital they need.

This makes it easier for small businesses to access the funds they need without having to worry about high costs and long wait times. Furthermore, leveraging private capital markets provides an opportunity for small business owners to cultivate relationships with investors who can provide valuable insights and advice that they may not be able to access through traditional lenders.

Small businesses can no longer afford to wait for traditional financing options to access the capital they need. Private capital markets offer a viable solution for small businesses looking for the funds they need during tough economic times. By leveraging the private capital markets, small businesses can quickly and cost-effectively access the capital they need and cultivate relationships with investors who can provide valuable advice for their business.