Can Private Equity Financing Help Your Business?
Whether you’re growing your small business, looking to buy out the owners of the business you manage, or just hoping to restructure your capital, private equity financing is a solid solution to inject funding into your business. This type of financing works by allowing an investment firm to put money into a privately traded company, in exchange for a stake in the company. One of the most common forms of this kind of financing is mezzanine financing. Mezzanine financing is a subordinate debt. That means that the debt you owe to the investors gets paid off after the primary debtors in the event of bankruptcy. This arrangement allows you to get the capital you need without leveraging your assets as collateral.
Those hoping to grow a business know that you need growth capital to do so. Banks may be unwilling to lend growth capital unless you have a very long history of good financial decisions behind you. Private equity financing might be the solution you need. Those seeking out growth capital specifically would do well to look to mezzanine financing, because it allows you to obtain funding while offering rights to convert the debt to equity interest or ownership in the future. Once you’ve grown your company using the capital that’s provided, the equity interest will look very different. The collateral requirements for this kind of financing are minimal, making it ideal for a small business.
A management buyout can be complicated if not done properly. You want to retain the right to provide the direction for the company, as you have done as the management of the business, but you need the capital to buy the business from its current owners. Mezzanine financing allows you to stay in control while granting you the funding to complete the purchase. Investors are aware that as the current leadership of the company, you know what it takes to keep the business stable, so use that experience to fund your purchase.
The saying goes “you need money to make money,” but in many cases you need money to move money, too. You can use private equity financing to restructure your capital arrangement. Restructuring capital allows shareholders to change voting rights, decrease expenses, improve efficiency and more. If your business has grown significantly since inception, it might be time to examine your capital structure and determine if using private equity financing to reorganize and optimize is the right move for you. As the business grows, so do its needs. You can be sure to meet those needs properly via a restructuring funded by mezzanine financing.