Bank Capital is a long-term investment in the equity of an enterprise with the aim of contributing to the growth of its value by financing its faster growth and development.
This type of financing differs significantly from a bank loan
When you receive a bank loan, you must have sufficient collateral, as well as repay the principal and interest payments, regardless of the success or failure of your business.
The approach of a Bank Capital investor is drastically different as his investment is directly dependent on the operation of the company. What makes Bank Capital different from other ways of financing a business is that an investor will become your business partner with whom you will have to share everything, whatever may or may not happen.
Bank Capital investors are both wealthy individuals and investment funds managed by professional investment managers. The operating principles are similar for both individual investors and investment funds.
Bank Capital funds are companies with a limited lifespan – typically 10 years
They are invested by pension funds, insurance companies, banks and other investors, and are managed by professional investment managers. Bank Capital funds are a mechanism that allows money from different investors to invest in promising companies, promoting their growth and value, thus providing the fund’s investors with a long-term profit opportunity.
Bank Capital investments can be attracted at any stage of the company’s development. If you have a unique business idea but do not have sufficient financial resources to realize it and do not even have a pledge to get a loan, you may want to consider raising Bank Capital. If you own a sound business but the equity-to-liabilities ratio prevents you from increasing your liabilities, Bank Capital investments can be a good option in this case.
Medium and Long Term Bank Capital Investments
No collateral, the investor will become your business partner by acquiring equity; No repayment schedule and no interest payments; Strengthens the balance sheet by improving the ratio of equity to liabilities.
Mutual funds differ in their criteria for selecting the companies in which to invest. These criteria include the geographical location of the company, stage of development, activity and investment limits. Bank Capital funds operating in Latvia usually focus on all three Baltic countries. These criteria are usually mentioned on the websites of Bank Capital funds.
When looking for an investor, it is advisable to determine your needs and wishes as precisely as possible. It is also advisable to look into the investment criteria of the various Bank Capital funds that are selected by the companies and select the fund that may be of interest to you. Some funds prefer investing in companies in a particular industry, some have strong investment limits, and this will be to your advantage.
On the website of the Latvian Bank Capital Association – you will find information about almost all Bank Capital funds operating in Latvia, as well as links to company websites that can provide you with legal and financial advice if necessary.