When should a capital increase be carried out?

A capital increase may be the only way to keep your company viable. Economic crises endanger companies’ sustainability , so you must be alert and ready to carry out the necessary operations to avoid failure.

Looking for new partners to move forward is something that, sooner or later, almost all entrepreneurs are forced to do. Companies often have ups and downs, and sometimes, it is necessary to inject liquidity to survive, but it is also expected to do so to continue growing.

Reasons to carry out a capital increase

• Losses: when the company is losing money and needs to capitalize to continue operating. You can let the company go under, but if you think the problems can be solved, it is interesting to look for new partners.
• To grow: to grow, you need to expand your company’s infrastructure; it is the only way you can face new challenges. Feel free to look for new partners to take advantage of the moment’s momentum.

Ultimately, it is always done to capitalize on the company and allow it to continue operating. There is no need to be afraid to look for new collaborators; all successful companies have had to do it at some point.

You may be reluctant to let new partners in because your company is your favourite toy, and you want it all to yourself. This is very normal; almost all entrepreneurs ask themselves the same thing when the time comes to decide on the possible capital increase for their company:

Won’t I lose control of my company?

The truth is that this possibility exists, but you will only lose control if you sell more than necessary. You can increase slightly and maintain control.

Obviously, if you sell more than half, you will lose it, but in the business world, everything can be agreed upon. It will depend on the agreements you reach during the sale process. You will always have your rights as a shareholder; you will not lose those under any circumstances.

Some people think that increasing a company’s capital means keeping the money that the new partners contribute in exchange for the shares, but this is only sometimes the case; normally, the money is used to capitalize the company. There are several types of capital increase.

Types of capital increase

There are three very different ways of carrying out a capital increase:

• Nominal value: The value of the shares is increased, and they are exchanged for the old ones. This is usually done to increase the value of the company.
• Issue of new shares: new shares are issued. Anyone is allowed to participate in the increase, but they are offered to the shareholders first so that they can maintain the percentage they had.
• Compensation of credits: when you have creditors. You can offer shares in exchange for the debts. In this case, the creditors would become shareholders of your company.

They are all designed to provide the company with new funds and make it more competitive in the market.

Conclusions

Carrying out a capital increase is an exciting way to capitalize your company to continue growing or save it in a crisis.

Remember that every business requires time and dedication. Keep your company from falling because you want to remain the sole owner. Surround yourself with partners who share your philosophy and that of your company to succeed in business.