Financial Investor Solutions
As your business grows and the demand for cash to fuel that growth increases, you may want to explore funding options. While these are evolving, and there are multiple solutions out there, we wanted to share the principles behind the two main ones - Debt and Private Equity - to get your thinking on track and to help you plan and choose.
Not unlike a loan, Debt finance is commonly used as growth capital for expansions of capabilities and territories and to fund internal buy-outs.
Providers will range from your high street banks to specialised debt providers.
One of the key aspects of debt finance is that it is a purely financial instrument, so you maintain complete strategic and operational control of your business. Also and equally important, it carries no dilution to the existing shareholders.
Debt funding provides a relatively low cost of capital. Also, the number of lenders and options available pays to negotiate repayment structures and interests.
You'll need a robust business plan to substantiate your business's future cash flow performance, demonstrating your ability to service the debt. It is also essential to ensure your internal financial process and reporting are mature enough to support you in managing your business more.
Equity financing involves selling shares of your business, majority or minority, to a Private Equity investor. The investors aim to support and enhance your growth plans so that you and the new investors (as shareholders in your business) share in the upside value created through that growth.
PE financing provides very flexible structures that allow for different shareholder objectives. The investment can be used for multiple purposes, as long as they de-risk the business and make it more valuable, including shareholder de-risking or exit, growth plan acceleration and inorganic growth through acquisitions.
You still have your independence to continue to manage the business but be aware, the investors will take a seat on your board and have a say in its future direction.
Private Equity diligence will be more demanding on your business, and therefore, you must prepare well for it. You need to present a robust business plan with exciting upside opportunities for you and the future investors and, ideally a view on future exit.
Just like in Debt funding, your financial management must be mature enough to cater to the reporting requirements once the business has been invested in.
Before reaching out to the market it is very important you have thought well through your requirement and the potential uses of the funding to improve and accelerate your business plans. There are many funding solutions and providers in the market and the more clarity you have the better fit you will find.
Reach out to us if you would like to know more!