Corporate Finance For Dummies

Chapter 3

Raising Money for Business Purposes

In This Chapter

Finding money for your business

Borrowing funds

Selling equity to raise cash

You may have heard the saying “It takes money to make money,” which insinuates that you must have capital available to start a business and make more money. Unfortunately, this little saying fails to mention exactly where to get that much-needed capital. Surely the multimillion-dollar Wal-Mart franchise that opened on 72nd street in Omaha, Nebraska wasn’t paid for in full by some rich entrepreneur who just happened to carry around exorbitant amounts of cash in his shoe . . . was it? (Hint: The answer is no.) That Wal-Mart, like nearly all businesses, was paid for, at least in part, with someone else’s money.

There are really only two primary ways that corporations can raise capital: By incurring debt or by selling equity. In both methods, the goal is for the corporation to acquire things of value, starting with cash then using that cash to purchase other things such as equipment, supplies, and so on. This chapter explores the different methods of how corporations raise money, and who the magical money-fairies are.

Raising Capital

Everything that ...