Posted July 12th, 2023
Non-dilutive funding is an attractive option for small and mid-sized businesses seeking capital without giving up equity or control. Traditional bank loans are harder to obtain due to stricter regulations favoring larger enterprises with established financials. However, alternative lending brokers like MCS CAPITAL, as well as, business development companies (BDCs), and wealthy investors, have stepped in to support smaller businesses.
Non-dilutive funding refers to capital received without relinquishing ownership. It includes grants, tax credits, crowdfunding, and loans. Non-dilutive funding is particularly beneficial during the early stages of a company's growth, allowing owners to retain control and build equity.
Dilutive funding, on the other hand, requires giving up ownership and control. Angel investors and venture capitalists provide equity financing but expect quick returns and growth, potentially compromising the company's long-term goals.
Non-dilutive funding offers several advantages. It allows owners to maintain full control and attract investors who prioritize sustainability and longevity over immediate returns. Non-dilutive funding sources include grants, crowdfunding, revenue-based financing, and venture debt.
Venture debt is a debt financing option for startups, providing capital without diluting ownership. Annual Recurring Revenue (ARR) lending is suitable for subscription-based services. Structured equity products offer investment opportunities based on predetermined features tied to underlying assets.
Finding the right funding provider is essential. BDCs, designed for small and medium-sized enterprises, offer flexible and favorable non-dilutive funding terms. They allow founders to retain control and distribute profits to shareholders.
Choosing between dilutive and non-dilutive funding depends on factors such as the company's growth stage, industry, and goals. Non-dilutive funding is particularly suitable for SaaS companies and startups aiming to preserve control and equity.
In summary, non-dilutive funding provides an attractive alternative for businesses seeking capital without sacrificing ownership or control. It offers flexibility and sustainability, allowing companies to pursue growth while retaining their vision. By exploring options like BDCs and revenue based funding sources, businesses can find the right financing solution that aligns with their objectives