Does shares help in raising capital? | Arshnoor Singh

Does shares help in raising capital? The answer is Yes. Mainly a startup raise capital either by selling shares (equity financing) or borrowing money (debt financing).

Debt financing can be a problem for a startup because it may have few assets to pledge for a loan especially in sectors such as technology or biotechnology, where a firm has few tangible assets plus the interest on the loan would impose a financial burden in the early days, when the company may have no revenues.

Equity financing, therefore, is the preferred route for most startups that need capital. The entrepreneur may initially source funds from personal savings, as well as friends and family, to get the business off the ground.

As the business expands and its capital requirements become more substantial, the entrepreneur may turn to angel investors and venture capital firms.