Debt Financing In 2025: Your Two Options

These are the two options for a growing company seeking commercial credit in 2025.

Traditional Banks

While traditional bank financing can be great, emerging growth companies typically cannot obtain traditional bank financing. When a bank reviews a company with high growth, the bank sees risk, but fails to see opportunity. Banks prefer stability to growth, and, as a result, dynamic companies are provided inadequate financing alternatives or no financing at all. In the rare case when traditional bank financing has been made available, it is often insufficient in amount and includes substantial covenant protections, including stringent earnings to fixed charges and financial coverage ratios, and many others.

Learn more about how we assist companies with their credit financings ►

Summary

  • Stability over growth
  • Restrictive, covenant heavy
  • Slow with regard to approval and business development

Alternative Lenders

Alternative lenders are quite different than traditional banks. Alternative lenders are often family offices or funds that have set aside capital to lend to growing companies. Contrary to traditional banks, alternative lenders enjoy working with high growth companies. They provide flexible financing solutions through ABL, purchase order, invoice, inventory, equipment, term loan, and other forms of credit, as well as merger and acquisition finance. Additionally, as they are typically unregulated, they act substantially more quickly and are more nimble with respect to business developments.

Summary

  • Covenant free or light
  • Fast approval
  • Flexible
  • Enjoy working with growing companies

We have been fortunate to meet and develop extensive relationships with a large number of the alternative lenders in the United States. If your company is looking for credit financing, we would love to discuss how we can help you secure the best possible financing for your needs. As ClearThink Capital is generally compensated solely by our client companies and generally does not accept referral fees or commissions from lenders, we, unlike our competitors, are highly incentivized to provide access to credit financing on superior terms with limited or no covenant coverage.

Let’s discuss how we can assist you with your credit financing. Get in touch with our team below.

The Top 5 Reasons Investors Say No

Throughout our careers, we have been pitched by thousands of companies and worked with countless companies to prepare them for and match them with the right capital partners. Here are the top five reasons we’ve seen why investors say no.

The 5 Most Common Reasons Investors Say No

Management’s inability to tell the story

If you can’t get your point across in the time it takes to ride up 20 floors in an elevator, you should refine your pitch. We’ve had calls with companies after which we could not even tell you what the company’s business is. It’s important to be clear and concise when pitching investors, and to make clear the benefit of your company to your target market

Valuation too high

Often, companies will approach us with an unjustifiably high valuation. They often say that these valuations were verified by third parties. Our response is: “Great, then have them invest at that valuation.” The most important valuation is the valuation that gets your transaction done. It does not matter what you think your company is worth if investors don’t agree.

No plan to liquidity event

What is the biggest fear of an investor in a private company? The biggest fear is that the company will succeed, but there will never be a liquidity event, thus making the investors captive minority stockholders, and their shares worthless. It’s important to have a clear path to a liquidity event, whether it is a public offering or a buyout. We like to structure our transactions as public-market based transactions when appropriate. This allows for higher valuations, friendlier terms, and happier investors.

Unattractive industry

As a management team, you could be doing everything right and hitting the ball out of the park within your market segment, however if the industry in which you operate is not attractive to investors, they will likely not take a chance on your company. An industry can seem unattractive to investors for a number of reasons: the industry could be highly competitive, the industry could be in decline, or the industry could be out of their area of expertise. You may be the highest grossing frozen fish distributor in the world, but if you approach a technology investor, chances are they will pass on the investment.

Uncertainty as to management’s ability to execute

Convincing investors of your ability to lead your company is just as important as convincing them of your company’s ability to succeed. Although an investor is purchasing a stake in your company, they are purchasing a stake in you as well.

Seeking financing? Let us help. Get in touch with our team below.