From investment banking to corporate banking to business capital, securities may be the next step in financing your company’s growth.
For mid-sized companies looking to take a next step, the answer is often in the capital markets. While bank financing is a valuable and flexible way to manage cash flow, fund daily operations and expand, there are many situations where a growing company will find more opportunities by working with public markets or private investors.
“At every stage of development, companies turn to the capital markets to support the growth of their business,” says Gene Bowles, Managing Director, BlackArch Partners. “We offer solutions to middle-market clients tailored to their specific needs, which can range from syndicated debt, private debt or equity capital, or merger and acquisition advice.”
A young, growing company may look to raise capital either via mezzanine capital or minority equity capital as a way to expand, he says. At the other end of the spectrum, he’s seen mature, family-owned companies seek advice when there is not a clear management succession plan. Those companies often need an experienced advisor to lead them through the process of a full or partial sale.
With so many options, it’s important to have a partner who understands your business, your specific industry and your goals. Here are some ways that the right one can help your business—at any stage and in any environment.
Debt Capital That’s Right for Your Business
There are times when a company needs capital, but may not want to take on investors, and a bank may not be the best option for a loan. In those instances, the debt markets can be an invaluable resource, says Bowles.
It’s a route with an almost dizzying array of options. Companies looking to borrow in the debt markets can choose from second liens, convertible-debt term loans, bridge facilities, private loan placements, mortgage-backed securitizations, high-yield corporate bonds and many more possibilities. As such, it requires working with someone who is knowledgeable about both your business and about the markets themselves.
In the debt markets, Bowles has seen a recent uptick in interest in loan syndications and mezzanine financing among middle-market companies.
A loan syndication is when a company borrows from a group of lenders, or syndicate, who pool their capital to make the loan and who also negotiate its terms. This a popular option when a single bank cannot provide a company’s full capital need.
Another option is mezzanine financing, an agreement where a company agrees that the lender can convert the debt into an equity ownership stake if the company can’t repay the loan. This option is worth considering for companies who need debt capital beyond what the bank market can provide. Most often, borrowers will use it to fund an acquisition or pay for growth initiatives.
Bowles is seeing more private lenders offering debt solutions that can be customized to a company’s business profile. It’s one more reason that a relationship with a banker who knows your business is so essential, notes Bowles.
Right now, one of the biggest issues across debt financing is the rising interest rate environment, says Bowles. “The cost of financing is higher, and there’s a bit of sticker shock over the last 12 months.”
A Mergers and Acquisition Advisor
When a business owner is ready to sell, for financial or other reasons, or to find more capital for growth, a merger or acquisition can be the right next step.
But there are other reasons to seek out an M&A professional. Some larger middle-market companies may have assets that no longer fit with the company’s current strategy. A sale can provide capital for growth.
M&A is about more than selling a business and its assets. On occasion, a company might need advice to make a strategic acquisition or to merge with a peer business to take on more market share basis. No two situations are the same, and no deal is simple. They all require deep industry sector/market intelligence, comparable-company valuation analysis and the negotiation of key acquisition or divestiture terms. This is one more area where an experienced advisor can provide meaningful value.
The Right Relationship
While the capital markets can seem sizable and complex, they’re actually a place where mid-sized companies can go for customized financing. But the stakes are high, and the wrong kind of financing or advice—in either equity or debt—can hinder a company’s growth for years to come.
That’s why it’s important to work with a partner who understands not just the investors and lenders with capital to offer, but also the markets in which you operate, the challenges and opportunities specific to your sector and industry, and your own unique goals when you look for financing.
Three Things to Do
- Learn more about capital financing options for your middle-market business.
- Watch a client testimonial about how Regions Securities helped one residential business find capital it needs to continue growing.
- Read more about Regions Securities.
