There are several other sources for a business to obtain financing. They include:

• Mergers & Acquisitions (M&A) is teaming up with another company and its resources
• Capital Markets (IPOs, Secondary Offerings) raise money from investors based on required prospectus documents which you file as an accurate representation of the status of your company
• Private Equity & Venture Capital receives money from specialized investors who take stock in your company and demand certain voting rights so they can have a say in the operations of the company. Their goal is to help your company grow fast so they can sell their stock and make a healthy profit
• Equity Financing involves selling shares of stock in your company and diluting your share of the ownership and control of your company
• Hybrid Securities start as a loan but can convert into equity
• Derivatives are hedges against market fluctuations in interest rates or commodity prices, including futures, options, and swaps
• Government Grants do not require repayment but they come with strict compliance requirements and usage limitations

All these alternative forms of business financing deal with money from other parties and carry significant risks. They are strictly governed by statutes relating to securities, taxes, contracts, and corporate governance. Violation of these laws takes the forms of debt default, breach of contract, misrepresentation, and regulatory non-compliance. Violations result in various consequences, including:

• Acceleration of Debt and Penalties
• Seizure of Collateral
• Personal Liability for Debts
• Lawsuits and Judgments
• Forced Bankruptcy
• Loss of Equity and Control
• Regulatory Fines
• Contractual Disputes

Why Legal Expertise Matters

The legal complexities of business financing can be overwhelming to anyone who does not fully understand the risks associated with the different types of financing. Missteps can create severe financial consequences, legal disputes, or loss of business control. Risks can be mitigated in a variety of ways that are sound and legal. The experienced business finance lawyers at Corporate Securities Legal LLP specialize in business finance law and can assist you in securing and managing your business finances effectively.

• Financial rights of the securities that are being transacted
• Financial performance of the issuer
• Prospect’s and management of the issuer
• Competitive information
• Trends in the economy, etc.

Issuer Transactions

Those who sell their securities to raise capital for their company, Primary Market, try to sell their securities in public markets or in negotiated, private placements. To make a public offering (primary distribution) one must be trying to raise capital from a bigger group of investors. If you are attempting to obtain capital from the public for the first time, then it is an initial public offering (IPO).

Trading Transactions

After the securities have been bought by the investor,and the investor wishes to trade them, they enter the Secondary Market. There is no longer capital being raised for the issuer if the investor tries to trade their securities in the Secondary Market. The securities are merely liquidated or partially liquidated for the investor, and a different investor now owns the securities for which they traded. These investor to investor transactions can happen in privately negotiated transactions or in public trading markets, like through a stock exchange or a securities firm’s computerized trading. The liquidity that the secondary market provides to the investor also enlivens primary markets. Ninety-nine percent (99%) of securities transactions occurs in the Secondary Market.

Markets within the Secondary Market

Within the Secondary Market there are two principle markets for trading securities in the United States.The first market is the exchange markets, where buy and sell orders all come together at a centralized location, and where there are “specialists” to pair buyers and sellers and to manage a “book” of orders. The second market for trading securities is the over-the-counter (OTC) market. This market is between securities firms that can obtain information about securities that are being sold by other firms. They can get this access to the bidding and selling information through their computer terminals and price sheets. NASDAQ is the most well-known of these OTC markets. A more private and less expensive route than exchanges and OTC markets is electronic communication networks (ECNs). This eliminates and middle man between investors and allows them to directly trade with each other.