Growth Financing Your Way Through Covid Times

Posted on: January 20th, 2022

growth-financing

Growth financing is a key element to propel a business forward, especially in an uncertain economy. Broadly speaking, growth financing can take the form of a number of structured debt solutions including mezzanine debt, acquisition financing and even asset financing. The middle market finance growth equation calls for capital, strategy, and execution to properly launch a scale up.

In times of market calm, the coefficients of these three variables are relatively equal. In the Covid economy of today, access to capital and human capital have taken on outsized importance in the growth equation. Our economy has seen one of the single biggest innovation waves over the past 2 years. Due to Covid, companies have reinvented their operational workflows out of necessity. The sudden conversion from physical to virtual for many activities has created innovative approaches to product development, customer engagement and delivery models.

How Valuable is Growth Financing for Companies

Growth financing is now especially valuable for companies to solidify these new value building pathways and achieve multi-directional scaling. Covid has also raised the curtain on the unpredictability of black swan events. We like to think that these events come fast, hit hard and then vanish. The endless, grinding nature of this Covid period suggests otherwise. All major economic uncertainties are subject to long and indeterminable lags. What initially could be framed as a one-time natural disaster economic event has become a series of continuous disasters.

Growth financing is not only a way to solidify new processes but also a smart move to ensure liquidity equilibrium. In life as in business, staying power can make a stark difference. Growth financing delivers financial strength, providing more staying power and a competitive leg up. Whether in the form of mezzanine debt, acquisition financing or any back-ended growth debt structure, abundant growth capital is a big difference maker in today’s economy.

Mezzanine debt loans occupy the risky echelon beneath the bank but ahead of the equity in a capital structure. They are naturally subordinated to the bank loan via an intercreditor agreement wherein the senior lender retains the power to block their interest or force them to standstill.

In the middle market, acquisition financing providers are regarded as super intelligent and hardworking. They have distinguished themselves at elite banks or consulting firms and possess the ability to synthesize voluminous levels of info into a coherent, succinct takeaway or observation. This skill is extremely valuable in attributing causation to business drivers in a financial model used to foretell the future.

The deal world thrives on the belief that the institution providing acquisition financing will deliver on their promise. Lenders usually telegraph their capital capabilities early on during the sales pitch and give their deal sizes and hold levels for their fund.