Is Private Equity the Answer?

Is private equity the answer?

Is the credit crunch beginning to bite for businesses?

Are you having to watch your cash flow very closely?

Banks are keen to say that they are still open for business to lend to companies with a good record, that have adequate security to offer and can demonstrate that they can meet the interest and repayments.

For day to day working capital many companies have invoice discounting arrangements that are flexible with the ups and downs of monthly sales, working on an agreed percentage of cash made available against invoices due.

However if the bank says …. “no more” …. there comes a point for many companies when the bank can go no further, yet the business needs more capital.

Best not to wait until you have an immediate need for cash. Talk to your bank, find out how close you are to that point, you will need time to put in place alternative funding.

If there are good prospects for profitable growth then private equity may be the answer. Whilst this means giving up some shares in your company to the investors there are some strong benefits for the business:
• Provides a longer term solution and demonstrates commitment and belief in the business
• Provides cash for the business by way of equity and perhaps also loans
• Brings a focus on growth
• Brings expertise to the boardroom and added control to the business
• Improves the gearing of the company and is likely to enable the bank to lend more in the future

Investors back the management team. They would want their money to be used largely to grow the business and would be supportive and challenging to that end. Their objectives are to increase the value of the business with a view to an exit in 3/5 years.

Businesses usually need more capital as they develop.

Call for help sooner rather than later to prepare the case for investment in your company. Read more here