Covid-19 response, help and guidance
Are you an owner, CEO or CFO of a tech company and worried about how Covid-19 affects your ability to raise capital?
In this post, I want to arm you as a business leader, with information to help you to make the right decisions about how you can use private debt to keep your company liquid and to maintain cash flow during the crisis.
I’ll cover the five common questions you ask and give you my answers to those questions.
If you have additional questions about your ability to raise private debt during the Covid-19 crisis, contact us online or call us today on +44 2071 181 108 to speak to a specialist private debt advisor about the current lending market and how you can get options on the table.
1. How is the private debt fund market affected by the Covid-19 crisis? Can I still access funding?
Here’s some good news. Yes – while private debt funds are focusing more on managing their portfolio companies, they are still open for business.
If you have a robust business model and operate in a market with plenty of room to grow, then you have the opportunity to close a transaction.
However, given the increased credit risk associated with these uncertain times, private debt funds want to avoid overleveraged transactions.
2. What about the cost of capital? Is it increasing?
At the moment, we haven’t seen the cost of capital being unduly affected by the Covid-19 crisis.
But it might mean some businesses that would have qualified for certain funds yesterday might have to consider slightly more expensive options today. But we are talking about one or two % points here.
3. How has Covid-19 affected the process of raising private debt?
First off, you can expect timelines to increase. Therefore, we recommend you start conversations earlier.
In particular, you should factor in an increase in the lead time from signing a term sheet to completing the process. In other words, we expect the process, including due diligence to take between 12 and 16 weeks to complete the process, and drawdown funds.
4. What should I do now to maintain the financial strength and stability of my company?
We recommend you get options on the table now so that you can make an educated decision about how to:
- Manage your cash burn rate
- Set up working capital buffers
- Maintain your liquidity
- Get funding to weather inflection points and make strategic pivots where necessary
5. Do I need to postpone my mergers and acquisitions plans?
M&A activity is always a tough subject during troubled times.
So once again, we recommend getting options on the table so that you can ready your war chest to help you to deal with the unprecedented changes in the business environment.
The bottom line is this. During the Covid-19 crisis, private debt funds will focus more on managing their portfolio companies. But at the same time, they will consider taking on new deals from companies that:
- Can demonstrate a robust business plan
- Operate in a market with plenty of room to grow
If this sounds like your tech company, then now more than ever we recommend you look at funding options before you need them.
How we’re continuing to support you and your business
Know that Fuse Three has one goal. To help fast-moving, disruptive and agile tech companies around the world to keep going through this unprecedented crisis by brokering specialist flexible private debt finance with minimum dilution.
So please be assured that we’ll do our best to support you and your business during this crisis.
Some additional resources
And finally, you may find these additional resources useful: