What is Capital Raising?
Capital raising refers to the process of obtaining additional funds to support business operations or growth. For struggling businesses, this can be a critical step in avoiding closure.
There are various methods of raising capital, including equity financing, debt financing, and crowdfunding. Each has its advantages and challenges, and the choice often depends on the business’ current financial situation and future prospects.
Equity Financing
Equity financing involves selling shares of the company to investors in exchange for capital. This method can be particularly effective for legacy businesses like Silver Fleece Australia, which may have a strong brand value but need fresh funds to adapt to market changes. By offering equity, the company can secure substantial funds without incurring debt. However, this approach dilutes the ownership stake of existing shareholders and requires careful consideration of the terms offered to new investors.
Debt Financing
In debt financing, a lender provides funds that must be repaid with interest. This can be a viable option for businesses with predictable revenue streams and the ability to service debt. For Silver Fleece Australia, taking on debt could provide the necessary capital to modernise operations, invest in new product lines, or enhance marketing efforts. The challenge with debt financing is ensuring that the business can manage repayments without jeopardising its financial stability.
Crowdfunding
Crowdfunding, where members of the public register on a digital platform and pledge funds for specific projects, has emerged as a popular method for raising capital, especially for businesses with a strong customer base and community support. This approach can be particularly effective for a brand like Silver Fleece Australia, which has a loyal customer base eager to support its revival. Crowdfunding also has the added benefit of generating marketing buzz and engaging with the community directly.
Saving Legacy Businesses
Legacy businesses often have rich histories and deep-rooted connections with their communities.
For instance, Silver Fleece, a well-known name in the Australian clothing industry, has been a staple for generations. These businesses often have a loyal customer base and a unique market position, which new entrants might struggle to replicate. The closure of such companies not only means losing a piece of local heritage but also the potential job losses and economic impact on the community.
Revitalising a legacy business involves more than just infusing cash; it requires a strategic approach to capital raising, modernisation, and market repositioning. Keeping these businesses alive preserves their legacy and continues to provide value to their customers and employees.
Example: Silver Fleece Australia
Knitting house Silver Fleece Australia provides a compelling case study in the role of capital raising for saving legacy businesses. Best known as the prime manufacturer of the Australian Test cricket team’s knitwear, Silver Fleece faced significant challenges in recent years due to shifting market trends and increased competition, despite recording turnovers of at least $2m in the past year.
On 26 June 2024, the Hindmarsh, SA company resolved to go under voluntary administration after 73 years with an unspecified amount of debt. At the time of the decision, the company was operating at 50 per cent capacity. Daniel Lopresti and Simon Richard Miller of Clifton Hall were assigned as the administrators to oversee liquidation of company assets, including an array of Shima Seiki knitting machines.
News of Silver Fleece’s crisis sent Australian clothing manufacturers and fashion businesspeople in a bind. Aside from the Test apparel, the company provides 77 schools in Australia with leavers jumpers and corporate uniforms, and has 20 staff on the rolls. Dean and Melanie Flintoft, founders of sustainable fashion brand Sunset Lover, led a group of investors to try saving the company from liquidation. The investors were given until 25 July 2024 to make an offer; an estimated $1.7 million in capital was needed.
The Flintofts’ team took 48 hours to raise at least $1 million. The liquidators accepted the raise and officially turned over Silver Fleece to them on 9 August 2024, with operations going back on full steam three days later.
Speaking after the acquisition, Melanie Flintoft said it was a big win for Australia’s cotton manufacturers and noted that amongst the 20 staff, there were a number of younger employees eager to learn more from the veterans. This may be notable for business continuity considering Silver Fleece is among a select few remaining knitting mills in Australia.
Sunset Lover is already on the move factoring Silver Fleece into their long-term plans, with a critical element ordering a new Wholegarment machine from Shima Seiki to increase output and efficiency. Silver Fleece, for example, is geared for building new clothes under Sunset Lover’s Resort 2024-2025 collection. The Flintofts are also aiming to help Silver Fleece land more clients in Australia’s healthcare, government, and education sectors, among others.
Conclusion
The importance of saving legacy businesses cannot be understated, especially when they have a rich history and a significant impact on their communities. Capital raising provides a vital tool for revitalising these businesses, offering them a chance to adapt and thrive in today’s competitive market. Silver Fleece Australia’s experience highlights how strategic capital raising can make a difference, preserving not just a business but a piece of local heritage. As we move forward, it’s crucial for both investors and business owners to recognise the value of these endeavours and support the continued success of our venerable businesses.
DISCLAIMER: This article is for informational purposes only and does not supersede business financial advice. AVANTE PARTNERS has no business interests with any company mentioned above. Please consult the legal counsel and a financial advisor.
