At some point, middle-market companies will require outside capital. It leads to recapitalization, which necessitates a change in the capital structure of a company. The reasons for seeking recapitalization are refinancing the existing loans on the most favorable terms, availability of funds for M&A or organic growth, and diversifying the holdings of owners or for their retirement.
A company with revenues in the order of $20 to $200 million is not a small business or an enterprise-level organization. Such businesses rarely go for IPOs to mobilize funds. The only way for such middle-market companies to raise funds is through debt capital or equity for restructuring, liquidity, and growth. The financial services division of Joseph Stone Capital will offer its services to help middle-market companies raise low-cost funds.
Requirements to raise capital
A middle-market company, which seeks recapitalization of $10 million or more, needs to be an established business making profits. Such companies need more capital to make their growth plans work. They may also need the expertise to run their business efficiently. Banks are not the best option for the expertise and capital mobilization together. Therefore, institutional investors will come in handy in such scenarios.
The two owners and two companies are not the same. Their goals, needs, and challenges are different. However, capital plays an essential role in both of these scenarios. The capital formation may be considered with M&A. The owner may not be ready to divest the company but needs debt capital for growth and to reposition it as a leader. It may be up for sale later after gaining sound financial strength and growth.
The three primary factors for mobilizing funds are liquidity, growth, and restructuring. A company can use the capital for organic growth or acquisitions. If you do not have sufficient funds, you may turn down a large order. In another situation, new equipment or additional staff would be required to fulfill a large order. Capital is needed in all these situations to grow your business.
Liquidity
The owners may be planning to diversify their holdings in the business. They may need money to buy another startup. It necessitates liquidity. New companies can mobilize funds from small investors, family members, or friends. They will agree to repay the loan at a later date. So, new capital can be used to replace these early investors. Joseph Stone Capital can help such companies raise low-cost debt capital by preparing the documentation and showing business prospects.
You can also refinance the loan with a less expensive financing option. It is useful in turnaround situations. You can use the services of a financial expert to prepare profitability statements and expected growth opportunities to get low-cost loans and reduce your interest burden.
The main aim of capital creation is to make your company bigger, stronger, and more profitable. If you plan to sell your company, a flourishing business will fetch you higher funds. The debt capital allows you to retain ownership compared to equity, where shareholders will have a say in your business operations.
