When a publicly traded company needs cash, it might require millions or billions of dollars. This is no ordinary business loan application with a commercial bank. A corporation may issue a cash call to request its shareholders put in the needed cash. This concept is more common in the United Kingdom than the U.S. In the U.S., selling assets, merging with companies with similar goals or selling the business are more common than cash calls.
Step 1
Calculate your cash needs to operate your business without running out of cash, based on past business. Review your accounts receivables and determine the time needed to collect on outstanding balances. Determine how fast you can sell off a significant portion of your inventory.
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Step 2
Account for your raw materials. Calculate how much it will cost you to convert them into sellable products. Offset those calculations with the income you can expect from selling those goods, then subtract your debts or accounts payables.
Step 3
Add your expected receipts and expected expenses, and determine your financial need for a cash call. Add a 20 percent cushion to that number.
Step 4
Explore alternative cash injection options, such as business loans. Sell licenses to your intellectual properties. Seek private equity investors, which may require you sell small portions of company ownership and give up a seat on your board of directors.
Step 5
Get approval from the board. Present them with the options you've considered and provide a proposal for the company's future plans with the cash injection.
Step 6
Send a letter to the investors explaining your needs, the reason you need this cash, when you need this cash by, and a plan for future stability.
Step 7
Contact the brokerage company so it's prepared when shareholders begin to wire funds or send in deposits by courier service.
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