Do You Struggle To Get The Financing You Need To Move Your Business Forward?
Businesses have two ways to raise capital: debt and/or equity. Selling equity will give a shareholder an ownership stake and does not need to be paid back, however, the new shareholders (owners) will want to share decision-making authority with the original founder(s).
Debt, on the other hand, represents a claim on the future earnings of the business. However, once the debt is paid off, the lender has no say in business operations or claim on future earnings. Debt is the preferred way to raise capital for most closely held businesses; but there are clauses in all loan agreements (some harsher than others) that can cause your business severe operational problems if not maintained. Here are a few issues that you should be aware of:
- Cross collateralization
- Debt to worth ratio
- Current ratio
- Working capital levels
- Debt service coverage ratio
- Cap X limits
- Guarantee(s) collateralized or non-collateralized
- Fees: packaging, loan origination, renewals, appraisals
- Real estate and equipment valuation methods: liquidation, market, hybrid
- Advance rates on accounts receivable and inventory
- Advance rates on new or used equipment and real estate
- Interest rates
- Prepayment terms and asset release clauses
All banks are not the same and each underwrite differently. Government programs are written the same but are interpreted differently by each institution using them,
Financing in your future? We can help a number of ways:
Read Our Posts
Read some of our key posts on business financing to understand some of the factors involved in raising capital for your business.
Read the case study “Turning Lemons into to Lemonade” how a utility contractor used new debt to propel his company forward.
With just a few hundred thousand dollars of revenue and no capital, Joe jumped off and started his own company…
Schedule a time to discuss how to go about solving your particular issue. This is a free 30-minute call.