IPO vs. Private Funding: Which Is Right for Your Project?
For a growing company with a large project ahead of it, an initial public offering (IPO) can look like the natural next step. Going public can raise significant capital, but it is a long, costly, and very public process. For many developers and operating companies, private debt and project funding can deliver the capital a specific project needs without giving up ownership or taking on the obligations of a public company.
This guide compares the two routes: how an IPO works, what it costs, when private funding is the better fit, when an IPO makes more sense, and how pre-IPO and bridge financing can work alongside either strategy. At Commercial Funding International (CFI), a boutique commercial mortgage brokerage and consulting firm founded in 2000, we work on USA and international funding requests from $1MM to $5 Billion+ in the USA and most USA-friendly countries.
How an IPO Works
An IPO is the first sale of a company’s shares to the public. According to the U.S. Securities and Exchange Commission, a company conducting a registered public offering must file a registration statement with the SEC and may not sell the securities until the SEC staff declares that registration statement effective (SEC, Going Public).
In practice, the company engages investment banks to underwrite the offering, works with counsel and auditors to prepare the registration statement (typically Form S-1), responds to SEC comments, markets the offering to investors, and lists its shares on an exchange.
The Costs of Going Public
The costs are substantial. PwC reports that underwriting fees are the largest single direct cost of an IPO and, based on the public filings of 1,000 companies, average 4% to 7% of gross IPO proceeds (PwC, Considering an IPO? First, understand the costs). Companies also pay legal, accounting, printing, SEC, FINRA, and exchange listing fees. PwC also notes that the ongoing costs of being public, including new systems, staff, audit fees, and Sarbanes-Oxley compliance, may be even higher than the costs of going public.
Timeline and Market-Timing Risk
An IPO is not a quick transaction. The company must prepare its financial statements, controls, and governance to public-company standards before it files, and then work through the SEC review process. Even a well-prepared company depends on the market: if investor demand weakens, an offering may be delayed, reduced, or withdrawn. That uncertainty is hard to manage when a construction schedule or acquisition deadline depends on the money arriving on time.
The Ongoing Disclosure Burden
Once public, a company becomes subject to Exchange Act reporting. The SEC requires annual reports on Form 10-K and quarterly reports on Form 10-Q, with financial information certified by the CEO and CFO, plus current reports on Form 8-K for specified events, often within four business days. Those filings become publicly available on EDGAR immediately (SEC, Exchange Act Reporting and Registration).
Private Debt and Project Funding as an Alternative
Private funding raises capital directly from lenders and investors rather than public markets, and it offers several advantages for a viable project.
Speed and Certainty
Private funding is negotiated directly with a lender or investor group, so it does not depend on an SEC review or a public market window. Timing varies by source and by how quickly the Client provides documentation. For example, the private funding sources CFI works with can close in a range of 10 to 45 days or more, and our Unique Capitalization Funders typically fund 45 to 60+ days after engagement.
Ownership and Control Retained
Shares sold in an IPO are sold permanently, and new shareholders gain a voice in the company. A loan is repaid on agreed terms, and the owners keep their equity. CFI’s Unique Capitalization Funders can typically provide up to 75% of project costs in senior debt and up to a combined 90% with the addition of equity capital from their network, with the Client bringing at least 10% of project costs in equity.
Confidentiality
A private loan or investment is negotiated with the lender and its advisors rather than marketed to the public. The company’s projections, contracts, and strategy are shared with the parties underwriting the transaction instead of being published in a prospectus and ongoing public filings.
Matched to a Specific Project
An IPO sells a share of the entire company. Private funding can be structured around one plant, development, facility, or acquisition, with terms matched to that project’s cash flow and collateral. Options include:
- Senior debt, mezzanine financing, participating debt, and subordinated debt
- Asset-based loans secured by commercial real estate, equipment, stocks, bonds, receivables, contracts, and other assets
- Joint venture financing, which is created for one specific project rather than an ongoing business relationship
- Business financing for expansion, acquisitions, equipment, and working capital
When an IPO Makes More Sense
An IPO is not the wrong choice for every company. It may be the better route when:
- The company needs a very large amount of permanent equity that it does not want to repay
- Early investors and founders want a public market in which to sell their shares over time
- Public shares are valuable as currency for acquisitions or employee compensation
- The business is growing quickly but lacks the assets or predictable cash flow to support debt
- Management is prepared for public reporting and shareholder scrutiny
Many companies use both: private capital funds a project now, and the company goes public later from a stronger position.
Pre-IPO and Bridge Financing
A company planning an IPO often needs capital before the offering, and the IPO may be delayed or come in smaller than planned. Private capital can fill that gap.
Bridge loans are used for a short period until permanent financing is secured or collateral is sold. CFI’s bridge lenders work on requests from $1MM to $50MM, generally for 1 to 12 months, with extensions possible up to 36 months. A credible exit, whether a public offering, permanent financing, or a sale, is central to the request.
Companies with valuable collateral can also consider asset-based loans of $1MM to $100MM, which can fund within 3 to 7 days after loan approval and preparation of the loan agreement. Our article on bridge loans vs. hard money loans explains how these short-term tools compare.
How to Prepare a Private Funding Request
Lenders and investors move fastest on organized requests. CFI’s sources look for a strong management team, a viable business plan, good growth potential, at least 10% Client equity in the project, the ability to generate cash with acceptable projected net income, and a clearly defined exit strategy (unless it is a build/hold and operate project).
Start with a concise Executive Overview of 1 to 5 pages that covers:
- The amount requested and the specific use of funds
- The project, its location, and its stage of development
- Current financials and cash flow projections
- Collateral, contracts, or off-take agreements that support repayment
- The equity already invested or available
- The exit strategy, including any planned IPO, refinance, or sale
- The experience of the management team
For a step-by-step guide, see our article on how to write a commercial loan executive summary. CFI initially reviews a Client’s overview at no charge, with no upfront retainer, to determine whether it is a project we want to work on. You can read more about each step in The Process. Projects outside the USA should review our international financing page. Resource and energy companies may also find our guides on financing a mining project and PPA financing useful.
Frequently Asked Questions
What is the main difference between an IPO and private funding?
An IPO sells company shares to the public after registering the offering with the SEC and brings ongoing public reporting obligations. Private funding raises capital directly from lenders or investors, often through debt structured around a specific project.
How much does an IPO cost?
According to PwC, underwriting fees are the largest direct cost and average 4% to 7% of gross IPO proceeds. Companies also pay legal, accounting, printing, registration, and listing fees, plus the ongoing costs of operating as a public company.
Is private funding faster than an IPO?
Often, yes, because it does not depend on SEC review or a public market window. Timing depends on the source and on how quickly the Client provides the required documentation.
Can private funding be used before an IPO?
Yes. Bridge loans, asset-based loans, and project-level debt or equity can fund a project while a company prepares for an IPO, or if an offering is delayed or raises less than planned.
What size funding requests does CFI work on?
CFI works on funding requests from $1MM to $5 Billion+ in the USA and most USA-friendly countries. For projects outside the USA, the minimum funding request is $10MM (USD).
Do you accept funding requests from brokers?
Yes. Broker inquiries are welcomed and appreciated.
Ready to Discuss Private Funding for Your Project?
If your company is weighing an IPO, has postponed one, or needs capital before going public, private funding may help you move forward on your timeline while keeping ownership. Email us a 1 to 5 page Executive Overview or call our office to discuss your project. Visit our Unique Capitalization and private funding pages or contact Commercial Funding International today.
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