Few entrepreneurs do not want their business to grow. A bigger company is more stable, more profitable and more interesting. Companies can grow more slowly or more rapidly. Often, in order for a company to grow, it needs additional financing. It is worth raising if the expected benefits to the business are greater than the cost of such capital. We have collected the most typical situations in which Capitalia has provided business financing , summarizing our experience over 15 years.

For working capital
There are a number of industries where earnings are strongly seasonally concentrated. A good example would be farms where our customers like Sprīdīši (perhaps seen in the egg stand at Rimi and other stores) and Vairogi have raised capital in the off-season to be able to easily return it from income at the end of the active season. For other companies, the season can be Christmas (Pure Chocolate and Pharm & med), for others spring (for example, Ganders). For all these companies, the capital raised helps to smooth out income fluctuations or prepare the necessary working capital for the seasonal rush.



For the implementation of large projects
When implementing large and long-term projects, companies often use bank loans, which are usually slightly cheaper than alternative financing. However, situations often arise when a bank loan is not enough even for the implementation of long-term projects. For example, the real estate developer in Liepāja, Lion Estate, used funds for faster project completion. Visual Media, on the other hand, raised money for the installation of additional advertising screens when the leasing limit was used. On the other hand, it is easier and faster for companies to attract alternative financing for projects and orders with a deadline of up to one year. For example, GP Systems (builders of mobile communication towers) and Aerodium Technology (manufacturers of wind tunnels) have done so.

To cover unexpected costs or investments
No matter how well you plan, situations may arise when unexpected and quickly preventable expenses arise. Solving problems is the daily routine of every successful entrepreneur and alternative financing can be a tool in cases of such unexpected expenses. For example, the Sprīdīši farm attracted financing when the flock of laying hens had to be replaced due to illness. The financing made it possible to ensure the continuity of production before receiving the insurance premium. On the other hand, the design company Eltex had an unplanned need to fulfill the liability guarantee and additional funds made it possible to smooth the created gap in cash flow.



For refinancing obligations
It is useful for a business manager to review his expenses on a regular basis (for example, once a year) to ensure that such expenses are necessary and optimal. One of such cost items can also be financing costs. Therefore, often thrifty entrepreneurs, such as Passive Home, Mostest and Liepāja Trans Storage, have turned to refinancing other more expensive or less flexible obligations in terms of repayment.

For the purchase of equipment or machinery
When buying highly standardized and locally available machinery or equipment, financing needs can mostly be solved by offers from banks or specialized industrial leasing providers. On the other hand, alternative financing can be useful for non-standard equipment or the purchase of equipment from abroad. For example, Rino Timber purchased wood processing equipment from Slovenia this way, and Rujas Meži - a harvester from Austria.

For the purchase or redemption of a business
Financing transactions when buying another company or buying out one of the shareholders are quite tricky, so banks are reluctant to deal with them. As a result, it is easier for companies to finance such an investment with alternative financing, while after concluding the acquisition process, refinance at the bank. Its owners, RCG Lighthouse, used alternative financing to repay an investment from venture capital fund Flycap. On the other hand, the Estonian chip producer Vogler Eesti used an additional loan to buy out minority shareholders.

For a security cushion, for expected or unexpected expenses, as well as for special business transactions - the use of alternative financing is wide. It is important for progressive company managers to understand the importance of this business management tool and how to apply it so that competitors who know how to use it do not rush ahead.