Capital Injection
What is Capital Injection?
A capital injection is an inflow of cash, stock or even debt into a company.
How Does Capital Injection Work?
Let's say Company XYZ is a private company and it wants to open 15 more stores in its retail chain. It raises money from family, friends and interested investors, who get ownership in Company XYZ in return. This money is a capital injection.
Why Does Capital Injection Matter?
Capital injections allow companies to grow, refinance or stabilize. Sometimes the government will inject capital into an industry or company that is too big to fail, in order to stabilize the broader economy. Capital injections, no matter the reason, are not free. Companies receiving the capital injections usually give up equity to the injectors, and sometimes they even give up board seats or controlling interest.
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