Share Capital: What SMEs Need to Know to Strengthen Their Financial Structure
Share capital is more than just a legal requirement to start a company — it's one of the foundations of financial stability for any SME. In a challenging economic climate with increasing public and private investment opportunities, understanding and strengthening your share capital can be critical to your business’s long-term success and growth.
Share Capital: What SMEs Need to Know to Strengthen Their Financial Structure
Share capital is more than just a legal requirement to start a company — it's one of the foundations of financial stability for any SME. In a challenging economic climate with increasing public and private investment opportunities, understanding and strengthening your share capital can be critical to your business’s long-term success and growth.
In this article, we explain clearly and practically what share capital is, why it matters for SMEs, and how you can strengthen it to improve access to funding and build trust with investors, partners, and financial institutions.
What is share capital and why is it important?
Share capital represents the financial resources made available to the company by its shareholders at the time of incorporation or during business operations. It serves as a guarantee to third parties (such as banks, suppliers, and the state) and as the company’s own source of funding.
Having strong share capital demonstrates commitment and credibility — both essential when seeking bank loans, government grants, or strategic partnerships.
Why should SMEs pay attention to share capital?
- Better access to credit: Banks and financial institutions review share capital when assessing risk. A low amount may limit financing options or even result in loan denial.
- Eligibility for EU funding: Many support programs (such as Portugal 2030 or the Recovery and Resilience Plan) require companies to show financial capacity, often linked to share capital levels.
- Investor appeal: Startups or growing SMEs looking for venture capital must show that the founders or partners have invested meaningfully in the company.
- Greater stability and flexibility: Higher share capital helps the business navigate periods of low liquidity, reducing dependence on external debt.
How can your SME strengthen its share capital?
- Profit reinvestment: One of the most sustainable ways to increase share capital is to reinvest profits instead of distributing them as dividends.
- Additional shareholder contributions: Current shareholders can make new investments, especially if there are plans for expansion or the need to present stronger financials.
- Bringing in new investors: Opening the business to new equity partners can boost capital and bring in expertise and access to networks.
- Converting shareholder loans into share capital: Loans provided by shareholders can sometimes be converted into share capital, improving balance sheet ratios and financial indicators.
Planning to increase your company’s share capital?
The process can be straightforward with the right guidance. Our team of experts in financial strategy, incentives, and SME structuring can help you:
- Assess your current share capital and determine the optimal amount;
- Select the best method for increasing capital;
- Prepare all legal documentation;
- Integrate the capital boost into financial planning for funding applications;
- Enhance your company’s credibility with banks and investors.
Want to know how much capital your business needs to grow?
Book a free assessment with our experts and find out the next steps to make your SME stronger and more investment-ready.
Click here to schedule your free consultation.
If you liked this article, subscribe to our newsletter to receive more useful content on financing, incentives and SME management.
Andreia Arenga
05.06.2025
All rights reserved. This article is protected by copyright and may not be reproduced, distributed, transmitted or used, in whole or in part, without the prior written permission of Equações Exaustivas Lda. All trademarks, company names, logos and products mentioned are the property of their respective owners.
In this article, we explain clearly and practically what share capital is, why it matters for SMEs, and how you can strengthen it to improve access to funding and build trust with investors, partners, and financial institutions.
What is share capital and why is it important?
Share capital represents the financial resources made available to the company by its shareholders at the time of incorporation or during business operations. It serves as a guarantee to third parties (such as banks, suppliers, and the state) and as the company’s own source of funding.
Having strong share capital demonstrates commitment and credibility — both essential when seeking bank loans, government grants, or strategic partnerships.
Why should SMEs pay attention to share capital?
- Better access to credit: Banks and financial institutions review share capital when assessing risk. A low amount may limit financing options or even result in loan denial.
- Eligibility for EU funding: Many support programs (such as Portugal 2030 or the Recovery and Resilience Plan) require companies to show financial capacity, often linked to share capital levels.
- Investor appeal: Startups or growing SMEs looking for venture capital must show that the founders or partners have invested meaningfully in the company.
- Greater stability and flexibility: Higher share capital helps the business navigate periods of low liquidity, reducing dependence on external debt.
How can your SME strengthen its share capital?
- Profit reinvestment: One of the most sustainable ways to increase share capital is to reinvest profits instead of distributing them as dividends.
- Additional shareholder contributions: Current shareholders can make new investments, especially if there are plans for expansion or the need to present stronger financials.
- Bringing in new investors: Opening the business to new equity partners can boost capital and bring in expertise and access to networks.
- Converting shareholder loans into share capital: Loans provided by shareholders can sometimes be converted into share capital, improving balance sheet ratios and financial indicators.
Planning to increase your company’s share capital?
The process can be straightforward with the right guidance. Our team of experts in financial strategy, incentives, and SME structuring can help you:
- Assess your current share capital and determine the optimal amount;
- Select the best method for increasing capital;
- Prepare all legal documentation;
- Integrate the capital boost into financial planning for funding applications;
- Enhance your company’s credibility with banks and investors.
Want to know how much capital your business needs to grow?
Book a free assessment with our experts and find out the next steps to make your SME stronger and more investment-ready.
Click here to schedule your free consultation.
If you liked this article, subscribe to our newsletter to receive more useful content on financing, incentives and SME management.
Andreia Arenga
05.06.2025
All rights reserved. This article is protected by copyright and may not be reproduced, distributed, transmitted or used, in whole or in part, without the prior written permission of Equações Exaustivas Lda. All trademarks, company names, logos and products mentioned are the property of their respective owners.
