The 1,000 day exit plan
At Axial, we speak with hundreds of business owners each month who are exploring the sale of their businesses. One…
Raising capital is a time-intensive, complex process for any CFO or CEO. What are the most common mistakes along the way?
We asked four lenders to share their thoughts.
“One of the biggest mistakes a CFO or CEO can make when raising debt is having a poor level of reporting. If your company has grown from a small to a mid-sized business, company-prepared financial statements are going to make a debt raise more difficult. CPA compiled or reviewed financial statements are higher quality and more reliable than direct statements. This reliability could result in a better risk rating when the credit evaluation occurs, and lead to cheaper financing.”
-Daniel Walsh, Senior Relationship Manager, Digital Banking, BBVA Compass
“Often CFOs and CEOs focus on the cost of their debt capital as being the most important attribute to achieving an optimal capital structure. Middle market businesses often come with a basket of risk-altering criteria including customer concentration, high fixed charges/debt service, commodity price fluctuations, and capital expenditure decisions, to name a few. Knowing your debt provider and constructing a debt agreement that best supports the unknowns that can impact your business can be just as important or more than the price of the debt.”
-Jeff Pfeffer, Managing Partner, CapX Partners
“Paralysis by analysis. Most CFOs and CEOs spend an extraordinary amount of time analyzing debt offerings and continually ‘going out to the market’ in an attempt to determine that they achieved the ‘best price.’ However, CEOs rarely factor internal and external opportunity costs for the perpetual delay. Debt is always cheaper than equity and too many accretive opportunities are lost.”
-David Ellis, Co-President, GemCap
“I believe many CEOs and CFOs could improve their capital raising experience and outcomes by having a more active relationship management strategy. When a financing event arises, it is beneficial for a company to have access to capital providers who are known to the management team, and who have a knowledge and comfort with the industry, company, and leadership team.
“This active relationship management strategy requires CEOs and CFOs (and potential capital providers) to invest more time upfront, prior to an immediate financing need. This can often serve as a deterrent to busy executives. However, the payoff is a shorter, more predictable process when it is time to complete a deal. It may also contribute to better financing terms, as the borrower is dealing with capital providers who have had time to develop an accurate risk profile of the business.”
-David M. Anderson, Managing Director, Medical Devices & Products, Capital One Healthcare
In recent years, the prominence of non-traditional investment firms in the lower middle market has seen a spike. However, despite…