Raising Capital

You may be able to raise funds from private equity firms and family offices. In return they would be looking to take a minority or majority stake in the business as part of a leveraged buy-out (LBO) transaction. The financial investor will join the board of directors and typically look to sell their stake or exit the business within three to five years.

Benefits to business owners include:

• The ability to realise capital from your business whilst staying involved financially and operationally
• Minimal day to day interference: Financial investors do not generally get involved with daily operations or disrupt staff
• Strategic input into growing the business
• Possibility of further financial investment to fund future growth opportunities 

Mezzanine debt providers sit between private equity and banks in terms of quantum and cost of funding. The core aspect of their funding is the provision of debt (typically at higher quantum and interest rate than banks). This is supplemented with a small minority equity stake. This funding route is helpful where a business owner is looking to stretch the amount of funding they are looking to raise or receive, without giving up too much equity in the process.

High street banks typically offer the lowest cost of funding, although are often more restricted in terms, quantum, and flexibility, in comparison to other funding sources. Challenger banks can be viewed as between high street banks and mezzanine funders on this spectrum. We know the particular individuals at each of the high street and challenger banks who are responsible for lending to private businesses doing transactions. These individuals sit within a different part of the bank to most companies’ day-to-day banking contact.