Preference Financing

Preference financing sits between equity and debt. It lets companies raise capital without giving full ownership rights to investors — while offering those investors special preferences like priority returns, priority repayment, and convertible options. For startups and growing companies, preference shares are a smart way to raise funds with more flexibility than pure equity.

We help founders structure, document, and comply with all regulations around preference financing, so the round stays clean and investor-friendly.

What is Preference Financing?

Preference financing means raising money by issuing preference shares or preference-linked instruments that offer certain advantages over equity shares.

Common instruments include:

CCPS (Compulsorily Convertible Preference Shares)
OCPS (Optionally Convertible Preference Shares)
RPS (Redeemable Preference Shares)
CCDs (Compulsorily Convertible Debentures – often used like preference)

These instruments let investors enjoy priority rights, while founders retain more control.

Why companies choose preference financing

Less dilution compared to straight equity
Investors get comfort through priority rights
Flexible conversion and repayment terms
Helps negotiate better valuations
Can be structured investor-friendly without losing control
Preferred by many VCs, angels, and PE firms

Key features of preference shares

Dividend preference
Preference shareholders get dividends before equity holders.
Liquidation preference
In case of exit or wind-up, they recover before equity shareholders.
Convertible rights
Can convert into equity after a certain period or on specific events.
Redemption
Some types can be redeemed by the company as per terms.
Voting rights
Typically limited unless conversion happens.