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How to finance your transition to the mid-market

How to finance your transition to the mid-market

Congratulations! You’ve made a success of starting up a tech business, proving its viability and growing it in size and profitability.

Along the way, you’ve engaged investors and secured multiple funding rounds.

Better still, you’ve created a business model you can scale to generate revenues without adding significant costs along the way.

Now you’re ready to drop the ‘S’ from ‘SME’, transition to the mid-market.

Of course, to scale up and transition to the mid-market brings changes to priorities and needs.

Notably, despite increasing sales and revenues, you know the cost of transitioning, in particular investment in people, processes and technology to service new business deplete cashflow resources.

As a result, you don’t want to put your company at risk.

But consider this. If you’re worried that when you transition you’ll outgrow existing finance facilities, and your cash flow will be stretched to its limit, help is at hand.

The alternative finance sector, in particular, private debt funds, offer multiple sources of debt finance deal structures to help companies with the challenges they face when they  transition to the mid-market.

Better still, with private debt finance, you don’t have to dilute your equity.

To illustrate:


When you need to invest for change

Transitioning into a mid-market business requires you to change your strategic course.

You shift your focus from innovation to servicing and growing your customer base. But when you add resources and accelerate revenues simultaneously, your costs increase in line with growth.

Then there’s the problem that conventional lenders look for tangible assets in the form of stock, plant and machinery and property in which to secure loans.

With private debt finance, you can leverage your IP to invest in new infrastructure to maintain and control your business. For example, IP finance can help you to:

  • Invest in research and product development to enable you to compete on a global scale
  • Build your technology to scale operational processes efficiently and reduce costs
  • Implement the right metrics to measure the cost of acquiring customers (CAC), monthly recurring revenue (MRR) and churn, and so on


When you need investment for growth

The consequence of missing deadlines is a priority when you have an event-driven need.

Private debt funds can move quickly to set up facilities so that you can:

  • Invest in infrastructure to support expanding operations
  • Expand into new markets or extend your business model into adjacent markets
  • Access a broader customer base or valuable assets by way of an acquisition


When you need to finance your customer success strategy

A sound customer experience builds trust and loyalty, leading to increased monthly recurring revenue.

So one of the challenges mid-market tech companies face is retaining customers and reducing churn by continually improving the quality of offering and service.

Because private debt finance is flexible when it benefits growth, you can use it on its own, or as a supplement to equity financing to fund your customer success strategy.


When you need to employ the right people

Finding and retaining people who share your vision and contribute to your success is critical for mid-market businesses.

A private debt finance line of credit is a revolving account that can support your hiring plans.

What’s more, you can repay and redraw from available funds as and when the need arises.


When you need to plan for contingencies

Tech sector growth isn’t always linear. More often than not, growth happens in curves and loops.

Private debt finance can help you to navigate inflection points such as economic turbulence, regulatory changes and even lumpy/seasonal cash flows by providing a protective ‘financial’ cushion before you head into the next round.


How to secure the right finance for your transition to the mid-market

When you scale up and transition to the mid-market, it is essential to surround yourself with trusted advisors.

In particular, a specialist venture debt advisor who can guide you in how best to fund your growth.

A specialist debt advisor will:

  • Make you aware of the options available to you
  • Have knowledge of the breadth of products and services available to suit your needs
  • Be able to translate unfamiliar terminology to ensure you get the best terms
  • Structure flexible transactions to deal with particular circumstances
  • Ensure any facility is cost-effective
  • Ensure facilities are simple to set up


The bottom line is this

Those who succeed at transitioning from an SME to a mid-market business, do so because they:

  • Start with a clear vision and strategy
  • Plan for the future
  • Are operationally efficient
  • Prioritise relationships with customers
  • Make contingency plans

To smooth your transition to the mid-market requires disciplined financial planning and execution.

Moreover, the earlier you start your planning, the stronger your negotiating position will be.

The good news is it doesn’t have to be you who secures financial resources. A debt advisor can do the work for you.

So take the next step.


And finally

If you’d like to discuss options for financing your transition to the mid-market, drop me a line, and we’ll set up a time to chat.