Growth Capital Law and Legal Definition

Growth capital is a type of private equity investment in relatively mature companies that are looking for capital to expand or restructure operations, enter new markets or finance a significant acquisition without a change of control of the business. It is also called expansion capital and growth equity. Growth capital allows a company to accelerate its growth. Growth capital can also be used to affect a restructuring of a company's balance sheet, particularly to reduce the amount of leverage (or debt) the company has on its balance sheet.

Growth capital is often structured as either common equity or preferred equity, although certain investors will use various securities that include a contractual return (i.e., interest payments) in addition to an ownership interest in the company. Apart from growth capital firms, growth capital investments are made by late-stage venture capital investors as well as more traditional buyout firms.