Your Cash Flow Bridge to Middle Market Growth

Posted on: December 29th, 2017

cash flow bridge Bridges are essential parts of our transportation infrastructure – letting us transit freely over otherwise unpassable obstacles. They provide the foundational stability to support a journey over a risky stretch, and safely deliver you back to terra firma, further down the road.

Their soundness and structure take the risk out of going from point A to point B. A corporate growth journey requires a similar level of transitional support. A business starts in the garage, and then ventures out to main street and then to the local highway.

At some point, it will enter the interstate highway and encounter a bridge taking it from one region to an entirely new region, perhaps a new oasis of economic opportunity.

Capital is a lubricant for this journey and there is no more foundational capital block than a simple cash flow loan. Cash flow loans impart a bridge like level of transportation to company’s moving down the road, allowing for greater resource fuel and accelerated speed.

Cash flow loans have long maturities and require little to no principal repayment. They allow a company to transition in size and depth, without undue pressure to liquidity or collateral.

Growth companies need time and space to evolve and mature. They usually grow in a stair step manner, with a large upfront investment followed by a revenue and profit boost a few years down the road.

The investment phase of the journey is often unpredictable, and can easily be over budget and put strain on finances. At a point where investment risk is the greatest, it is not easy for a company to continue the journey, when worried about running out of cash.

With its long term and foundational strength, a cash flow loan is the bridge that delivers the company back to safety.

It provides the structure that connects upfront investment with long term cash outflow, creating liquidity equilibrium and long term growth along the way.

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.