Debt or Equity Capital
Deciding which is best for your business.
Lender does not have vote with regard to corporate matters
Capital Types
Equity Capital
Equity capital transactions involve an individual or entity purchasing ownership in a company. The company receives funds from the investor, and in return, the investor owns part of your company.
Debt Capital
Debt capital transactions involve borrowing money from a lender, and paying that money back to the lender over a set period of time, as well as interest.
Learn more about what alternative lenders are offering: Commercial Credit: What Alternative Lenders Are Offering
Convertible Debt
Convertible debt transactions involve a loan with the ability for that lender to convert into equity.
Typical Transaction Types
Debt
Alternative Commercial Credit
Asset-Based Loans
Cash Flow Loans
M&A Financings
Term Loans
Factoring
Mezzanine
Equity
Alternative Public Offerings
Self-Listings
IPO
PIPEs
Venture Capital
Private Equity
Family Offices
Private Placements
M&A Financings
Convertible Debt
Bridge Financings
Mezzanine
M&A Financings
Debt Capital
Advantages and Disadvantages
Advantages
- No dilution
- The fixed return permits a company to arbitrage between the increase in value the capital will create, and the fixed price they have to pay for that capital
Disadvantages
- Has to be paid back
- Is senior to all equity
- May restrict actions by existing stockholders
Equity Capital
Advantages and Disadvantages
Advantages
- The capital a company receives is permanent capital, and generally does not have to be paid back
- Equity capital has great flexibility with regard to structure
Disadvantages
- Dilution
- Often used to give preferential or disproportionate rights to investor as opposed to existing stockholders
- Difficult to remove or eliminate troublesome equity holders
Convertible Debt
Advantages and Disadvantages
Advantages
- Fixed current return
- Under the right circumstances, does not have to be paid back
- Very attractive to risk-averse investors
Disadvantages
- Dilution
- Until converted, may restrict corporate actions by stockholders
- Senior to all equity holders until converted
Let’s discuss how we can help.
We are experts at the design and execution of creative financial, acquisition, and other corporate transaction structures. We work with companies to determine the best financing structure to fit their needs, help prepare the company and its materials for financial partners, match them with the most appropriate financial partners, and work as their advisor throughout the entire process.
