Posted on: March 12th, 2013

Keys to Successful Capital Acquisition Understanding the process of raising capital and what’s involved is the key to successful capital acquisition. Most companies think capital acquisition is an easy process that happens in a matter of days.

Those days are long gone!

Banks are not that interested in lending to smaller companies anymore. While you may get a lot of phone calls and emails from business lenders, most of them are just factors or real estate lenders.

These firms are asset based lenders who will not lend beyond the collateral. Companies that are successful at capital acquisition approach it like an important business development project.

They make sure they have the proper resources, focus and timing expectations. Most capital acquisition projects take months to complete.

They are highly information intensive projects. Most lenders require monthly financial statements and several years of profit & loss statements and balance sheets.

This requires a high level of financial information organization. Also, the lenders being targeted may have a different way of understanding business.

Most lenders are financially oriented as opposed to operationally oriented. This means that you may want to describe your business in financial ratios and metrics.

The more financially oriented your company appears, the more sophisticated the lender will think it is. Finally, it is critical to have a person on your team who is an expert at dealing with lenders.

An experienced financial consultant will manage each step in the process and ensure you are targeting the right lenders with the right set of materials.

In the acquisition financing arena, capital availability is destiny as companies require reliable access to capital to grow over the long term. Unforeseen capital needs usually arise when acquirers least expect it. This can cause some concern for the acquisition financing provider, especially when covenants tighten up and that working capital availability is utilized faster than expected.

Mezzanine debt borrowing is usually a straightforward activity that many companies use for funding of transitional growth. Mezzanine debt lenders are highly transparent about their due diligence approach and their post-closing loan management making it easy for companies to engage with.

Elections have consequences and positive ones at that for the acquisition financing middle market. While much media attention is paid to the direction of the yield curve and the Fed’s likely rate cuts, scant attention is paid to the more important drivers of the acquisition financing market – business psychology and regulatory climate.