Attraction of Funding
Faced with the need to generate enough cash for investments leading to growth or cost savings, companies, organizations or institutions usually look for external sources of funding. Sources and types of funding depend on the type and the status of potential fund receiver. In most cases they include both public and private types of finance.
Public Sources of Funding
It is possible to get access to public type of funding like subsidies or loan guarantees with no repayment obligation for companies at different company development stages covering different types of investments, including R&D, investments into manufacturing equipment, environmentally friendly technologies, HR development, improvement of business processes and other areas. These are mainly coming from the European Union Structural funds or programs like Horizon 2020. These funds are set by law and have an aim to achieve wider impact for the European or national economy and society. In almost all cases these funds are provided on a competitive basis. Also, they are easier to access, there is more public information about them, and they use standard procedures and application forms. The funds are also largely available for non-profit organizations and public institutions.
Private Financing For Companies
Private financing comes mainly through equity or debt financing or a mixture of both depending on the stage of development of the companies. Equity capital is raised by the company in exchange to ownership of part of the company’s shares. This type of financing helps to finance earlier stages of company development without attaining debt that needs to be repaid, but with incurring obligation to share company’s profits. After initial stages, when company achieves good levels of profitability it can consider debt financing option.
Typical private funding for companies include the following phases based on the stage of development of the company (see Figure below):
- Seed stage: when entrepreneurs or young companies raise capital from their own savings, families, business angels and friends. This stage provides initial funding for R&D, initial marketing necessary to reach the first clients.
- Early stage (called Series A round) companies aim at support and growth of sales and expansion of production.
- Early stage (called Series B round) is all about scaling. Companies at this stage already have user base and proven business model.
- Early stage (called Series C round) relates to already mature companies, which look for further expansions and are able to attract bigger institutional investors.
- Expansion stage related to companies, which are already on the path of rapid growth, so need capital to increase production capacity, enter new markets, or product development. Besides private equity investors, the companies at this stage could expect to finance their expansions through loans or mezzanine type of capital.
- The last stage “going public” relates to companies that are mature enough to attract sources of funding through market exchange.
Importantly, equity and debt financing is also support by the public funds, while aiming and faster development of private equity markets in different countries.
We, at ProBaltic, are eager to help accessing the best possible public or private funds that would satisfy the needs of our Clients as well as financing public or private entities. To this end, if the Client is eligible for finance, we:
- Help to clarify or define the project idea;
- Identify the right sources of finance, while explaining the details of available financing schemes and requirements;
- Prepare necessary documentation, including investment projects, business plans, feasibility studies, different forms and other relevant documentation;
- Support the Client in project implementation, while taking over administrative burden of formal and informal project reporting to financing entities.