Debt Financing is an attractive, lower cost, and non-dilutive source of capital used to fund your company’s working capital or growth requirements.
Businesses cannot operate or thrive without an external or internal capital infusion. Although virtually all private companies are funded by some variation of operating cash flow or infusion by owner-operators (through “sweat equity” or actual cash); many companies must look to external providers of capital due to internal capital restraints to fund either their short or long-term capital needs. Rather than have their ownership position diluted by external equity capital infusions, most entrepreneurs, business owners and shareholders prefer debt financing as an attractive, non-dilutive, lower cost of capital alternative. Debt financing allows business owners to maintain control of their businesses with limited constraints, as opposed to for example, equity financing.
Types of Debt Financing
There are typically two reasons for debt financing: short-term working capital needs, and capital required for growth.
Working Capital is the net cash tied up in Accounts Receivable, Inventory, and other non-cash current assets used in the day-to-day operation of business. There are different “Asset-backed” debt financing vehicles used to fund these uses of cash, the most typical are Revolving Lines of Credit (RLOC’s) and Senior-secured Term Loans. There is also Lease financing to fund purchases of capital equipment needed to run your business.
Debt financing that will help you grow your business, whether that is hiring more people or an aggressive marketing campaign; demands different Loan structures and pricing. These different vehicles have different requirements for collateral and are typically more expensive.
How can we help you secure debt financing?
Sound confusing? Don’t worry – It usually is to small business owners. The trick is to match the different debt financing vehicles available, from the appropriate Lenders, with the Credit Profile and Objectives of your business. Leveraging the experience of several years as a lender and advisor, we will complete a detailed underwriting of your business and help you navigate through the plethora of options available, as well as securing an optimal Debt structure and pricing. This would be done at a very reasonable cost to you, and in a timely and efficient manner requiring limited management resources and involvement.