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Non-Bank Financing Alternatives for Middle Market Companies

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Investment Banking St. Louis, MO – (314) 783-9550 Access Capital Partners is an investment bank assisting private middle market companies with revenues of $10 million to over $200 million with capital raising and business funding (bank loans, non-bank alternative capital sources, mezzanine capital, private equity), mergers and acquisitions (M&A – buy sides – sell sides) and restructuring. We also provide strategic consulting and credit-related advisory services to business owners, lenders, private equity partners, angel investors, high net worth and accredited investors.

Access Capital Partners has put together an overview of non-bank funding options designed for executives and professionals operating in the middle market. In this guide, we describe who the capital providers are and what situations they work best for.

In this guide we'll explore the providers of acquisition financing, buyout financing, LBO financing, growth capital, asset based lending, turnaround financing and special or unique situations.

Published in: Business

Non-Bank Financing Alternatives for Middle Market Companies

  1. 1.     When Your Bank Says No - Go Somewhere Else Non-Bank Financing Alternatives for Middle Market Businesses Capital Raising | Mergers & Acquisitions | Strategic Advisory Capital Raising | Mergers & Acquisitions | Strategic Advisory
  2. 2. When Your Bank Says No - Go Somewhere Else Access to Capital Middle market companies constantly go through inflection points that require capital- making acquisitions, buying out partners, building new facilities, expanding into new markets… the list goes on. Naturally, the first place you turn for capital is your existing bank. The capital is relatively inexpensive and you’ve had a relationship with your banker for years. But where can you turn if your bank, or even multiple bank lenders, say no? Does this mean that raising capital isn’t possible? Probably not. There are other options. Capital Raising | Mergers & Acquisitions | Strategic Advisory 2
  3. 3. Capital Raising | Mergers & Acquisitions | Strategic Advisory Bank Won’t Provide Enough Liquidity For: New Bank Lenders Turning You Down Because of: Bank Won’t Renew or is Asking You to Find New Lender Because of: Common Situations when the Bank Says No When Your Bank Says No - Go Somewhere Else • Working capital (A/R, inventory) • Expansion / Growth • New facilities • Equipment purchases • Acquisitions • Buying out a partner • Shareholder distributions • Not enough collateral • Industry concerns • Recent operating losses or fluctuating income / cash flow • Tripped loan covenants • Change in bank strategy • They really don’t understand your business • Not enough collateral or the type of collateral bank wants • Recent operating losses or fluctuating income / cash flow • Foreign receivables or collateral • Customer concentration • Unique industry 3
  4. 4. Capital Raising | Mergers & Acquisitions | Strategic Advisory When Your Bank Says No - Go Somewhere Else Non-Bank Alternatives are Plentiful, But Hard to Find Non-bank financing alternatives have become a prevalent source of capital for many private, middle market companies, but they’re harder to find than bank lenders- they’re scattered around the country and typically don’t have local offices or advertise. It’s common for many companies to not know who these funding sources are, where to find them or what types of capital they provide. The capital providers listed on the next page all provide funds in situations where banks either say no or aren’t appropriate. Finding the capital partner(s) to provide the funding you need can be transformative- even if it’s just a temporary solution until a bank becomes a better fit for your needs. 4
  5. 5. Capital Raising | Mergers & Acquisitions | Strategic Advisory When Your Bank Says No - Go Somewhere Else Seek Help When Appropriate If you aren’t an expert in capital sourcing and don’t aspire to be one, seeking help from an investment banker that specializes in raising capital will save you time, money and help you identify whether a funding source is a good fit given your objectives. Here are seven types of non-bank capital providers for middle market companies: Business Development Companies (BDCs) Mezzanine Funds Small Business Investment Corporations (SBICs) Credit Opportunity Funds Private Equity Finance Companies Insurance Companies 5
  6. 6. Capital Raising | Mergers & Acquisitions | Strategic Advisory Finding the Right Capital Provider Is Important and Depends on the Situation Each type of capital provider listed below invests under different circumstances and on dramatically different terms, so finding the right capital partner(s) based on the company profile, current situation and future prospects is important. Here are the funding situations where each non-bank financing source is best suited: Finance Companies Insurance Companies BDCs SBICs Mezzanine Funds Credit Opportunity Funds Private Equity Working Capital (AR, Inventory) ✔ ✔ Growth Capital ✔ ✔ ✔ ✔ ✔ ✔ ✔ Acquisition Financing ✔ ✔ ✔ ✔ ✔ ✔ ✔ Asset Purchases: Equipment, Real Estate ✔ ✔ ✔ ✔ Partner or Management Buyout ✔ ✔ ✔ ✔ ✔ ✔ Turnarounds ✔ ✔ Bridge Loans ✔ ✔ Special or Unique Situations ✔ ✔ ✔ Shareholder Distributions or Liquidity ✔ ✔ ✔ ✔ ✔ 6
  7. 7. Capital Raising | Mergers & Acquisitions | Strategic Advisory Description BDCs SBICs Finance Companies •  Revolving lines of credit •  Senior term loans •  2nd lien loans •  Subordinated or mezzanine debt •  Senior term loans •  2nd lien loans •  Unitranche loans •  Subordinated or mezzanine debt •  Minority equity •  Senior term loans •  Subordinated or Mezzanine debt •  Unitranche loans •  Minority & preferred equity •  Common equity Type of Capital Insurance Companies •  Senior term loans •  2nd lien loans •  Unitranche loans •  Subordinated or mezzanine debt •  Minority equity Non-Bank Alternatives: Who They Are and the Types of Capital They Provide Here’s an overview of each funding source and the type(s) of capital they provide: Finance Companies are specialty non-bank lenders that make asset based loans (directly tied to specific assets) & cash flow loans (tied to overall cash flow). •  Take greater risks than banks Insurance companies provide a wide range of financing options to middle market borrowers. •  An option for borrowers with >$10mm EBITDA •  More flexible amortization and covenants •  Higher leverage limits than banks Business Development Companies are publicly traded companies that provide a wide range of financing options to middle market borrowers. •  Wide variety of financing options •  More flexible amortization and covenants •  Higher leverage limits than banks SBICs are privately owned investment companies that are licensed by the Small Business Administration (SBA). •  Provide wide variety of financing options (debt & equity) •  Have some limitations on industry and company size 7
  8. 8. Capital Raising | Mergers & Acquisitions | Strategic Advisory Mezzanine Funds Credit Opportunity Funds Private Equity •  Subordinated or mezzanine debt •  Minority & preferred equity •  Common equity •  Revolving lines of credit •  Senior term loans •  2nd lien loans •  Subordinated or mezzanine debt •  Bridge loans •  Common equity •  Subordinated Debt •  Minority & preferred equity Mezzanine Funds are private investment funds that primarily make loans, sometimes with an equity co-investment. •  Provide greater leverage than banks •  Typically subordinate to the senior lender •  Primarily concerned with cash flow, not assets Credit Opportunity Funds are private funds that primarily make loans, but also make equity investments, in unique or special situations. •  They are opportunistic and extremely flexible •  Charge a premium for the risk they take Private equity funds are private funds that make equity investments in businesses either for majority or minority ownership positions. •  Help management teams implement best practices to grow shareholder value before exiting the investment •  Great partners for owners who want some liquidity now, but want to remain in the business for a few years before an exit and additional liquidity event 8 Description Type of Capital Non-Bank Alternatives: Who They Are and the Types of Capital They Provide Here’s an overview of each funding source and the type(s) of capital they provide:
  9. 9. Making Capital Simple- Working with Access Capital Partners: Save Time. As an executive, the most important resource you have is time. We’re a turnkey solution to help you evaluate every option, then we structure, source, negotiate and help close the deal. We minimize the distraction of raising capital so you can focus on driving your business to the next level. Leverage Our Expertise. We specialize in raising capital for middle market companies and financial sponsors and have access to literally thousands of funding sources across the planet. Whether you're replacing an existing lender, financing an acquisition, buying out a partner or recapitalizing the company, we know which funding sources will provide the best terms, with the most flexibility and be the best fit for the situation. Get the Best Possible Pricing, Terms and Structure. We run a competitive financing process for each of our clients. That process forces funding sources to put their best foot forward and meet critical deadlines. Certainty of Closing. Access Capital Partners is acutely focused on putting its clients in the best position to achieve a successful outcome. With years of experience in raising capital in all types situations and across many industries, we're constantly focused on identifying and preemptively addressing potential obstacles that may make it difficult to raise the capital your company needs, so you can close on schedule. Access Capital Partners 7733 Forsyth Blvd., Suite 1168 St. Louis, MO 63105 314.783.9550 www.accesscappartners.com Securities offered through StillPoint Capital LLC, Member FINRA and SIPC Tampa, FL 33626. StillPoint Capital is not affiliated with Access Capital Partners.
  10. 10. Access Capital Partners 7733 Forsyth Blvd., Suite 1168 St. Louis, MO 63105 314.783.9550 www.accesscappartners.com Access Capital Partners is middle market investment bank focused on advising private companies, financial sponsors and diversified corporations on business sales, acquisitions and raising private capital. We leverage years of experience in raising capital and M&A across a wide range of industries and situations including: mergers, business sales, acquisitions, recapitalizations, distressed situations, rapid growth, refinancing, partner buyouts, management buyouts and shareholder liquidity events. $8.0B+ 100+ 35+ 1000+ In total transaction experience Completed transactions Years of middle market experience Relationships with funding sources including VC firms, private equity firms and debt funding sources around the globe Securities offered through StillPoint Capital LLC, Member FINRA and SIPC Tampa, FL 33626. StillPoint Capital is not affiliated with Access Capital Partners. Capital Raising | Mergers & Acquisitions | Strategic Advisory

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