Your foolproof strategy for securing cross border funding
With demand for streamlining and automating business processes by way of subscription-based online software growing, it’s no wonder you want to scale your tech business by international expansion.
But to expand your business internationally, you need money. In particular, you need to fill the gap between investment in growth and resulting profits.
You’re hesitant about turning to your equity provider because you don’t want to dilute your ownership further.
On the contrary, you’re aware that conventional bank debt finance has failed to keep pace with high growth business models like yours.
Fortunately funding your international expansion strategy isn’t as hard as you might think.
In fact, private debt funds have stepped in to offer flexible cross border funding, alongside equity sponsorship.
Let me show you how this works:
Start with a good plan and a business case
Like any lender, private debt funds need to understand your commercial model and your leverageable intangible assets. Also, how you plan for your business to grow and how quickly. And if you’ve planned an exit strategy.
Understand the costs associated with financing international expansion
As an illustration, the costs you’re likely to encounter include:
- Due diligence
- Protection of IP
- Ongoing operations
- Hiring new staff
- Sales & marketing
Be clear about how you intend to use the capital provided
For example, in addition to accelerating growth with mergers and acquisitions, you can use funds to invest in devices and resources to:
- Get you in front of new customers
- Localise your offering
- Localise your marketing and lead generation
- Localise your customer support
Factors affecting your debt finance deal structure
Naturally, the type of deal you arrange will depend on:
- How much money you need
- Your working capital requirements
- How long you’ll need it
- What you’ll need it for
With this in mind, your options include:
- Taking debt finance in tranches (or slices): Here you draw down funds in stages. For the lender, it means it can spread risk. For the borrower, this debt arrangement is cost effective and can lead to more availability of funds.
- Amortised loans: Your loan is paid off in regular, equal instalments. These loans tend to be quick to underwrite and covenant-lite.
- Non-amortising loans including interest-free and balloon payment loans: Typically used by high growth companies that need to avoid the short term cash flow hit resulting from paying off an amortising loan. Paying off the principal is usually timed to coincide with a future fundraising event or a planned refinance.
- Revenue-based loans: Most commonly, you’ll see these loans used for projects requiring high upfront investment to secure a future revenue stream.
- MRR based credit lines: Often used by SaaS businesses with £500k monthly recurring revenue that need working capital. You pay interest on drawn balances. As monthly recurring revenue grows so your credit line availability increases.
So it all adds up to this
You have got a business plan, you’ve identified costs, and you’re clear how you’ll use the funds and the type of debt structure most suited to your business.
The next step is to put together a compelling investment memorandum.
Beyond that, you’ll need to have a dialogue with private debt funds so that you can thrash out the core terms of your deal.
Of course, you can do this work yourself. On the other hand, you can hand over your debt arrangement requirements to a third party who can save you time and money by structuring a suitable deal and negotiating it on your behalf.
It’s your call.
If you’d like help securing cross border funding, drop me a line about debt advisory and brokerage services, and we’ll set up a time to chat.