Equity and debt capital
A fundamental distinction is made between equity and debt capital. Equity providers become shareholders, share the entrepreneurial risk and receive shares and co-determination rights in return. Debt providers make money available for a certain period and expect interest and repayment, irrespective of business success.
For young companies with high risk and still low revenues, equity is often the main focus. As stability grows and cash flows become predictable, debt capital gains in importance. In practice, both forms are often combined.
The most important sources of capital
Each source has its own expectations regarding maturity, growth potential and say in the company. A typical reason for our consulting is the question of which source is realistically attainable in the current phase.
- The founders' own funds as well as family and friends: often the first financing, which also signals your commitment to third parties.
- Business angels: wealthy private individuals who invest at an early stage and often contribute experience and contacts.
- VC (venture capital, risk capital): professional investment companies that invest in companies with high growth potential and have clear return expectations.
- Funding programmes: grants, development loans or equity investments from public development institutions of the federal government, the federal states and the EU (European Union), usually subject to specific requirements and application procedures.
- Bank loans: classic loan financing, which as a rule requires collateral, robust planning and a certain company history.
Finding the right mix
The choice of financing has long-term consequences: for control over the company, for the distribution of future profits and for later financing rounds. We compare the possible options on the basis of your planning and set out their advantages and disadvantages.
Subsidies are often applied for via the principal bank and can be combined with private capital. Which programmes come into consideration in the individual case is clarified in coordination with your bank and the competent funding bodies.
What we expressly do not do
Our role is preparation and assessment from a business management perspective. We do not provide investment advice or investment brokerage within the meaning of the KWG (Kreditwesengesetz – German Banking Act), and we do not broker financial instruments or loans. You negotiate terms and conclude contracts directly with the respective capital provider, with legal support from your lawyer.
Frequently asked questions
When does VC (venture capital) become an option for us?
Venture capital providers generally look for companies with a large market, a scalable business model and initial evidence of demand. For many solid but more slowly growing projects, other sources are better suited.
Will you arrange a loan for us?
No. We do not broker loans. We prepare your documents and you yourself for the meeting with your bank.
Are subsidies always the most favourable solution?
Not necessarily. Subsidies can offer attractive terms but are associated with conditions, application effort and deadlines. They should be embedded in the overall planning.