Alternative Financing Options
it is no secret that the credit markets are experiencing unprecedented
turmoil and uncertainty, and the causes and the timing of a strong
recovery remain hotly debated topics, the real question that family
owned and closely held business owners are asking is: What can we
do now about real business capital needs and shareholder liquidity
needs, and where can we look if the traditional source of capital
- our local lender - is less prone to lend more money?
de Visscher & Co. has a long history of focusing on more “family
friendly” and longer term sources of both debt and equity capital
for our clients. In response to the current credit crisis we
have been surveying some of our capital providing relationships to
gauge their current interest, and wherewithal, to provide funding
in the near term. While many are still making loans, it is
some of the non-bank-related sources of capital that are particularly
active and worthy of a closer look.
- Banks Not Impacted by the Mortgage
Crisis – Some institutions
were not involved in sub-prime mortgage lending and have hardly
been impacted by the current crisis. They remain actively
looking for good credits and long term relationships.
- Non-Bank Commercial
Finance Sources – a corps of commercial
finance sources, that often struggle to compete with aggressive
bank lending in long running, overheated market periods, are enjoying
stronger deal flow as traditional senior lenders have retrenched. Although
many have an asset and collateral orientation, they are actively
lending on working capital, equipment and real estate assets.
Partnership Specialty Finance Groups – a number
of boutique lending shops have raised their capital from limited
partnership investors instead of bank depositors. Thus they
are not subject to the same restrictions, capital requirements
and regulatory pressures that some of their institutional banking
brethren are encountering. A subsection of this group that is expected
to play an emerging role as a source of capital is foreign investment/sovereign
wealth funds. This source of capital should play a more active
role in today’s market and has exhibited an increasingly
- “Junior Capital” Alternatives
including the use of:
- Subordinated Debt Sources - that offer “interest only” financing
for a few years and provide debt capital amounts over and above
the levels that the traditional banker cannot accommodate.
Capital Equity Sources and Minority Investors – that
tend to be more “family friendly”, and “patient” in
nature, in the structure of their investment terms. These
sources, a mix of family offices and private family investors,
take a longer term outlook, typically a 5–7 year, or
longer, investment horizon. For these reasons, they are often
the most attractive investment partners for family owned and
closely held companies.
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