Finance

Weighing your Financing Needs

Traditional financing is tested, tried and true—a financial lifesaver for many companies. But, traditional financing can often be slow to materialize and onerous to obtain—not the best recipe for a business sensing a need to pounce on an opportunity now.

Hence, the appeal of alternative-financing methods, which arguably are a bit esoteric and not exactly tested, tried and true. Time will tell, of course. So how does one sift through the alternatives to find the right one for the right growth strategy?

Here are some decisions to ponder: What happens after a debt arrangement scheme? Do you want to retain as much equity as possible with the current owners to prevent share dilution and maintain management control? If so, one of the many debt instruments like convertible debt, a capital equipment sale and lease back model, or a crowdsourcing site like FundingCircle offer decent rates without an ownership stake.

Are you comfortable with a capital infusion for a small equity interest, but you don’t want to go the private-equity route because they like to run things their way? A Business Development Company (BDC) and a passive non-preferred equity arrangement both offer the means to give away a bit of the company for cash, without giving away the store or its control. (For more on BDCs, see p. 42.)

If you have no problem with a more robust equity-for-capital strategy, a crowdfunding site like CircleUp presents a way to tap seasoned investors in your industry that believe in your company’s value proposition and simply want to see it flourish. They may even have some good advice to offer, without making you feel that they’re the ones in charge.


Chief Executive

Chief Executive magazine (published since 1977) is the definitive source that CEOs turn to for insight and ideas that help increase their effectiveness and grow their business. Chief Executive Group also produces e-newsletters and online content at chiefexecutive.net and manages Chief Executive Network and other executive peer groups, as well as conferences and roundtables that enable top corporate officers to discuss key subjects and share their experiences within a community of peers. Chief Executive facilitates the annual “CEO of the Year,” a prestigious honor bestowed upon an outstanding corporate leader, nominated and selected by a group of peers, and is known throughout the U.S. and elsewhere for its annual ranking of Best & Worst States for Business. Visit www.chiefexecutive.net for more information.

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