Why raise debt capital when you don’t need it
So you’re a CEO or CFO of a fast-growing and scale-up tech business and want to seize opportunities to get to the next step?
You can visualise the future. What’s more, you have a clear idea of what you want and need to do to get your tech business there.
But let me guess. You also have a clear idea of how much debt capital you need to reach your milestones.
How to raise that money is the question you secretly dread.
The good news is you’ve taken the first step. You’ve thought of the bigger picture and have a plan for the long term.
Your next step is to enter the negotiating room with confidence.
To do that, you should think about raising debt capital before you need it.
“Good fortune is what happens when opportunity meets with planning.” Thomas Edison
Here’s the thing. When you raise debt capital before you need it, you can plan your finance needs around your expecting S-Curve growth projections.
As a result, you can move quickly to capitalise on event-driven opportunities.
Also, you can avoid problems associated with external pressures such as political and economic changes.
Most importantly, when you raise debt capital before you need it, you put yourself in a strong negotiating position.
By this, I mean you can avoid pressure to give away personal guarantees and take on covenant laden transactions.
But that’s not all. You can keep investors happy by planning your exit early,
And most important of all, you can keep up the momentum.
To raise debt capital before you need it:
Start by doing your homework
Background research makes sure you do not waste time talking to lenders/debt funds who have no intention of investing in your tech company.
Then help lenders assess the opportunity
Put together a compelling investment memorandum that’s easy to read, understand and act on. Your investment memorandum should:
- Summarise the opportunity
- Provide a concise company and market overview
- Detail how much you need
- Outline the terms of the proposed investment
- Provide a summary of the risks (no-one likes surprises)
- Outline what you expect to achieve with the funds
Running a successful high growth tech business takes careful financial planning to make sure money doesn’t become a stress on your management team.
When you have a clear idea of what you want to do and how much money you need to reach a milestone, it makes sense to raise debt capital before you need it.
A specialist debt advisor can run through your options. Also, source the most appropriate lending partners and structure transactions so that you can confidently take steps to reach your goals.
As a result of your planning, you’ll:
- Put yourself in a strong negotiating position
- Be able to seize time-sensitive opportunities
- Have the financial strength to weather inflection points
Most important of all, when you raise debt capital before you need it, you can keep up the momentum you need to achieve your business goals.
If you’d like to find out how raising finance before you need it can help you to achieve your business goals, drop me a line and we will set up a time to chat.