Accessing capital can be challenging for private companies, even in the best of economic times. I think it’s safe to say the current atmosphere across financial markets certainly hasn’t made the process any easier. Since the onset of the COVID-19 crisis, the lending appetite of the banking industry has narrowed significantly. With lenders on edge, and corporate borrowers feeling overwhelmed, the stakes are high for lending negotiations to go well. The truth is, accessing capital in the corporate credit market today coincides with your ability to access the right business advisory services to optimize your chances for success. We are well versed advising clients on lending, from both the corporate and private equity sides of the table.
Approaching Existing Capital Providers
Similar to many economic sectors, lenders are also feeling the COVID-19 shockwave. Your manner of approach matters. Because many banks are challenged to stay on top of mounting problems in their own loan portfolios, you can’t expect your bank to be proactive in addressing yours. That being said, every bank operates differently, and having an established relationship based on transparency and credibility can go a long way. But understanding how to start the conversation, what to ask, and what to present can be intimidating. Your existing capital providers are interested in very specific information, and it’s important to remember they don’t work for you in an advisory capacity. As a business advisor, I have your best interests in mind, so I can help you get answers to your questions and prepare you to get the best possible results from your negotiations.
Entering the Private Lending Market
When existing, traditional capital providers just aren’t a feasible option, the private lending market may be your silver lining. It provides alternative funding sources not under the same regulatory restraints as traditional bank lending. When bank appetite for new deals are scarce due to market volatility, these firms expand their horizons and look for opportunities to capitalize on filling this lending gap. Private debt funds have the needed capital available and have already been instrumental in offering working capital financings and keeping purchasing needs from going unmet for private companies.
Private lenders are generally more costly, and the terms and conditions may be less onerous than traditional bank lending. I don’t say this to discourage corporations in need. I’m only highlighting the need for higher-level due diligence. Private lenders will undoubtedly be focused, careful, and selective in their investments. They are looking at portfolios from a risk angle, and, most notably, they need comfort that each of its lending opportunities has been vetted and analyzed to optimize chances for a positive return on investment. To stand out in the crowd, potential borrowers are best served to present a deliverable that best describes your company, your specific ask of the potential lender, along with the analytical support that a lender would require efficiently to evaluate the opportunity.
You have to go into lending negotiations prepared. My team and I are uniquely qualified to assist you with this process. We provide services to corporate clients, including advising in their banking relationships, and we provide services to private equity firms and lenders, which gives us the leading edge in understanding the rights and potential concerns for corporate borrowers. We’re here to help, and we know how to fight the fight and play for the win.
LGA’s Business Advisory Services Team takes pride in positioning clients to play offense, throughout all stages of a business’s lifecycle. We’ve helped hundreds of companies grow from start-up to successful exit, and we can help you too. Contact me today to discuss your business advisory needs.
In response to client demand, my team is also offering assistance with PPP forgiveness, as well as a COVID-19 Business Check-up designed to help businesses identify and monitor potential risks during these uncertain times.
Kenneth Segal is a Partner and the Managing Director of Business Advisory Services at LGA. He has over 25 years of experience developing operational, financial, risk, and value assessments; business and strategic plan preparation; and financial and projection modeling. Ken works with businesses at all stages to grow and achieve their financial goals by maximizing value and minimizing risk. He drives LGA’s advisory approach by bringing experience, insight, and connections and by fostering a leadership culture with every client.