Equity requires a higher rate of return than debt as the owners of a business get repaid after the lenders and are therefore exposed to more risk. On the other side equity financing is flexible as there is no fixed repayment schedule and the investors generate their return only when the company is profitable.
Albacore advises clients on matters such as the amount of capital required, the valuation of the company, potential funding structures and terms, and the profile of potential investors. We will then work with our clients to determine and execute the most appropriate strategy given their specific needs, including the management of the entire process so that the outcome allows then to achieve their strategic goals.
If a business is considering raising debt, whether it be through senior bank financing, private debt placement, commercial notes or issuing bonds, it is critical to match the cash flow generation profile of the project or business with the structure of the debt. The pricing of the debt (interest rate) is a relevant consideration, but the most appropriate debt profile should be the primary consideration.
As with most of our projects when we are assisting our clients with raising debt we start by building a robust financial model which is used to determine the financing need and cash flow generation of the business on a monthly basis. Our approach is always graduated – meaning that we consider the cheapest and simplest sources of funds first and then bridge the funding gap with more expensive and more complex solutions.