Benefits of Non-Diluted Funding

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Many government programs including SIBR’s and STTR awards, grants, vouchers, competitions and tax credit programs, to name a few come with regulatory components with their funding that prohibit add on funding that requires the owner’s equity to be diluted.  That brings us to one of the most popular forms of alternative financing: non-dilutive funding.

 

• Non-dilutive funding refers to any capital a business owner receives that doesn’t require them to give up equity or ownership. For many, non-dilutive funding is the prerequisite step to getting their startup, small business or full-fledged operation off the ground.

• Contributions from donors, tax credit programs, vouchers, grants, competitions, and even family constitute forms of non-dilutive capital. Non-dilutive funding is often considered most helpful during the establishment of a company, yet businesses of all sizes rely on it at different stages of growth.

• During the initial growth phase, companies want to ensure that they can keep building equity, which makes non-dilutive funding a vital tool.

• Be mindful, even though an owner doesn’t relinquish any shares, doesn’t mean the funding comes with no strings attached. Similar to how some loans accrue interest, specific grants can incur additional restrictions, oversight or other organizational costs.

• At the startup phase, running a business can be incredibly challenging. Perhaps a lack of experience or minimal credit history makes it difficult to break into traditional loans. Or perhaps the owner lacks industry connections to trustworthy investment sources. No matter the reason, companies may find that it’s an uphill battle to secure sizable capital with few strings attached.

• Non-dilutive funding is especially attractive for new companies since owners retain full control of their own enterprises. Owners never have to worry about the whims of venture capitalists, angel investors or other financiers.

• Owners that are confident in their own leadership, with a firm grasp of the company’s long-term objectives, are especially committed to retaining full control. Moreover, external investors will not reap future financial gains through non-dilutive funding.

• During this sensitive phase, founders can expect to spend three to nine months securing the capital they need to grow. New companies often fall prey to unattractive loan arrangements, believing that they’re unable to secure a better deal.

• Not only does non-dilutive capital ease the strain, it offers owners a chance to net more favorable funding arrangements since the investors are less worried about generating a large return. Non-dilutive funding agents are attracted to the sustainability and longevity of the business, which much more closely aligns with the business’ goals. Learn more

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Contact Us today if you need venture capital funding for mid-tier projects between $5M - $120Bn.