Do you need to raise funds for your business? If you're running a limited company, one way to bring in cash is through share capital—essentially selling shares in your business in exchange for investment. Just like you see on Dragon’s Den, but without the dramatic music and grilling.

It’s a popular way to fuel growth, reduce reliance on loans, and bring in experienced investors. But, as with any big business decision, there are pros and cons to consider.

While share capital can unlock exciting opportunities, it also means sharing control and profits with shareholders - who can bring their own set of challenges, along those big bags of cash!

So, is it the right move for your business? Let’s examine the advantages and disadvantages of share capital, helping you weigh up whether it’s the best funding option for your company. 

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What is share capital?

In simple terms, share capital is the money a company raises by issuing shares to investors. When someone buys shares in a business, they’re essentially buying a slice of ownership. 

This means they may have a say in decision-making and could receive a share of the company’s profits through dividends.

Only limited companies can issue shares—sole traders and partnerships don’t have this option. There are also different types of shares, but the most common ones are:

• Ordinary shares – These give shareholders voting rights and a share of profits but come with risk if the company doesn’t perform well.
• Preference shares – These typically don’t offer voting rights but provide priority when dividends are paid.

Raising share capital is a common strategy for businesses looking to fund expansion, invest in new projects, or strengthen their financial position—without taking on debt.
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Advantages of share capital

Raising share capital can be a game-changer for businesses looking to grow without the burden of debt.

Here are some key benefits:

1. No loan repayments or interest

Unlike bank loans, share capital doesn’t come with monthly repayments or interest charges. Once investors put money into your business, you’re not obliged to pay it back—this can ease cash flow pressure, especially for startups or companies in growth mode.

2. Access to significant funding

Banks and lenders can be cautious about financing businesses, but with share capital, you can potentially raise large sums from investors—especially if you attract the right backers. This funding can help scale operations, invest in new technology, or expand into new markets.

3. Boosts business credibility

Having shareholders on board—particularly experienced investors or industry experts—can enhance your company’s reputation and attract even more investment, partnerships, or customers.

4. Reduces financial risk

Since investors share in the business’s success (or failure), you’re not taking on personal liability like you would with a loan. If the company struggles, you won’t be personally responsible for repaying investors.

5. Supports long-term growth

Share capital isn’t just about quick cash—it’s often used by businesses with big ambitions. With the right investors, you’re securing financial backing that can fuel long-term expansion rather than short-term survival.

6. Brings in expertise and connections

Many investors are more than just financial backers—they bring industry knowledge, experience, and useful contacts that can open doors for your business. A strategic investor could be the key to scaling faster and smarter.

Of course, raising share capital isn’t all sunshine and rainbows. Let’s look at the potential downsides before you make that Dragon’s Den application!

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Disadvantages of share capital

While raising share capital can provide a financial boost, it also comes with some challenges. Here’s what you need to consider before giving away shares in your business.

Key drawbacks to keep in mind

1. Loss of control

The more shares you issue, the less control you have over your company. Shareholders often have voting rights, which means they can influence major business decisions. If you give away too much equity, you might find yourself outvoted on key choices.

2. Profit-sharing with shareholders

Unlike a loan, where you eventually pay off the debt and move on, shareholders expect a return on their investment—usually through dividends. This means that instead of keeping all your profits to reinvest or take as earnings, you’ll be sharing the rewards with investors.

3. Compliance and legal responsibilities

Issuing shares isn’t as simple as just handing out ownership—it involves legal paperwork, shareholder agreements, and ongoing reporting obligations. Larger businesses may even need to comply with stock market regulations if they’re publicly traded.

4. Pressure from shareholders

Some investors are hands-off, while others want a say in day-to-day operations. They may push for short-term profits rather than long-term stability, which could create friction if your business strategy doesn’t align with their expectations.

5. Exit complexities

If shareholders decide to sell their stake, it can complicate business ownership. In some cases, this might bring in new investors you didn’t choose, which could change the dynamic of your company.
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Is share capital right for your business? 

Raising share capital can be a powerful way to fund growth without taking on debt, but it comes with trade-offs. While it provides access to substantial investment and expertise, it also means sharing control and profits with shareholders. 

If you’re looking for long-term backing and don’t mind giving up some ownership, it could be the right move. 

However, if maintaining full control is a priority, other funding options might be better. Need advice? Speak to Crunch before making a decision, we’ve helped thousands of business owners like you access share capital. 

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