Private companies prepared to use modern financing instruments to benefit from opportunities in economic downturn
Companies should proactively reconsider their financing strategies. There is a risk that in the aftermath of the economic downturn, bank loans will become considerably more expensive or will not be renewed particularly for borderline and non-investment-grade borrowers.
Many traditionally financed medium – sized companies not willing to embrace change will be under pressure. They have received unprecedented amounts of bank loans, a considerable proportion which were granted in the form of short-term, supposedly cheap bank loans. Short term bank debt will now put a strain on both profitability and cash flow and expose many to risk due to the short-term nature of the financing commitments.
Proactive private companies across all sectors can shift and consider the liquid “private debt market” to secure longer-term financing solutions with bullet maturities or a low repayment rate. Additionally, raising subordinated capital, preferred capital, preferred equity or mezzanine capital up to minority shareholdings, entrepreneurs can increase their flexibility in different business situations. They will achieve financing security and the flexibility to take advantage of attractive investment and acquisition opportunities.
Please feel free to talk to us, we are constantly in touch with approx. 200 debt and mezzanine capital providers, many of which are currently open for business and remain providing financing to medium – sized companies.
Ervin Schellenberg of Capitalmind Investec explains in an interview why companies should look for alternative financing instruments.
To read the full interview (in German) click here