Most people think about visiting the banker when the subject of financing a value-added business arises. But the banker won’t be interested in seeing you until you and others have put your own money into the venture. So you need to think about equity financing before you talk about debt financing.
Equity can come from a variety of sources for a value-added business venture. Usually you and the other members of your group are the first place to find equity. After all, if you are not willing to invest, why should anyone else. Family and friends often come next. This may be enough for a small business project. However, large projects often require a stock offering for potential investors. Once this level of sophistication is reached you have a whole set of legal rules and regulations to follow. Angel investors and venture capital groups are another source.
Factors Underlying Producer Investments in Processing Cooperatives provides an insight into raising equity for value-added business ventures.
For more information on equity financing, see the box at right.