Private placements – Raising capital by customers becoming investors
There are times when your business needs money and it’s simply not possible to get it via conventional means – an option you might not have considered is selling shares in your company to a customer or group of customers. BusinessWeek | Small Business Financing has a post on the opportunity, key considerations and potential pitfalls of such private placements.
A private placement is a streamlined way to raise capital from a group of investors, whether individuals or companies.
I take issue with the first noted benefit – branding – but private placements certainly lead to increased loyalty and understanding from those who invest.
A potential pitfall overlooked is competition in B2B environments – will your agreement to sell shares in your company restrict your market opportunities as they apply to companies your new investor considers competition.
Private placements shouldn’t be looked at as a cash flow strategy, but for those of you in need of capital and find it out of reach, private placements are something you should consider.
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