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Why Companies Raise Money

Chart illustrating where companies invest the capital they've raised.

By Inc. staff | 
 

Some lucky companies can generate all the money they need internally. But most businesses end up turning to outside sources to meet their needs. Where are growing companies investing the capital they're raising this year? A survey of 259 businesses (half with revenues less than $20 million) done by Ernst & Young last spring showed that many more companies are raising money and many businesses are using the money for multiple purposes. The most common uses are for developing new products and services, and expansion into new geographic areas.

% of Companies Investing Capital
Use Raised in That Area

1991 1992

New products and services 50% 62%

Expansion into new geographic markets 47 52

Funding current operations 45 49

Capital expenditures/expansion 40 49

Acquisitions 38 41

Funding joint ventures 26 32

Refinancing debt 26 31

Cashing out part of ownership 18 27

Source: The Ernst & Young Entrepreneurial Services Group's annual survey of members of the Institute of American Entrepreneurs, Dallas, 1992.

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