When is a good time for owner-managed businesses to consider private debt?

It’s a widely held belief to always raise funds for your business when you don’t need them. Here at Fuse Capital, we strongly agree with this statement. In this article, we will explain why.



Raising money when you don’t need to puts you in control. As an owner-manager by definition, you have no external shareholders to lean on. Being ahead of the game is not a luxury, it’s a necessity.



Being ahead of the game in your fundraising will give you access to more lending options which can mean larger quantums, better terms and potentially cheaper debt. Private debt funds appreciate businesses that think ahead. Nobody likes a last-minute panic.



A major positive about private debt is that you don’t dilute your stake or give up equity. You stay fully in control of your business and the only obligation you have is to pay back the money borrowed and the interest on the loan.



However, fundraising can and does take time. Starting the process early allows both you and the private debt funds to run at a pace you can handle, without any panic or desperation that will negatively impact the transaction.



Another way of looking at this is the difference between owner-managed businesses and venture capital or private equity-backed businesses in what we call ‘fundraising cadence’. Venture capital or private equity-backed businesses are to some extent always fundraising. That means they tend to be investor ready. That doesn’t make them better, they just do it more.



Owner-managed businesses tend to fundraise less. This means more time needs to be spent throughout the process for various reasons. Those reasons could be preparing the Investor Memorandum, structuring the transaction, selecting the right lender partners, and closing the deal.



For owner-managed businesses, debt is especially useful for working capital purposes.  But it can also be used to release equity, buy out shareholders, acquire other companies, and also good old-fashioned growth.



A comment from Hayden Smith, Debt Advisory Partner, Fuse Capital

“At Fuse Capital, we have helped a significant number of owner-managers secure competitive funding which has provided them with the certainty and confidence to invest in their business and /or execute on game-changing acquisitions and change of ownership events. By commencing a debt raise prior to any liquidity or time pressures, owner-managers stay in the driving seat and are able to extract the best possible terms from lenders.”



Book a free, no-obligation consultation with one of our debt experts


Further reading

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Working Capital Finance

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