In order to fulfill their vision, entrepreneurs need capital. Many entrepreneurs may be geniuses in their own right, but do not always possess the skill set or the patience to pursue the sources of funding needed to enhance their business.
Entrepreneurs who prepare and plan for their future needs at different stages of growth will avoid finding themselves in a desperate capital crunch. Even though there is no perfect time to raise capital, with the right professional guidance, every stage of a business can be engineered to successfully raise needed capital. And with the assistance of investment bankers at Allegiance Capital, business owners can prepare their companies for a potential capital raise.
Allegiance can evaluate the business in an impartial light, identify its strengths and weaknesses, and deliver an actionable plan to access the capital markets. Ultimately, this will improve the company’s performance levels, which can help the business owner achieve a premium price when they make the decision to sell.
The Early Stages of Business
This is the most common stage when business owners are seeking an infusion of capital to start or build their business. Shortly after the birth of the business idea, owners often turn to friends, family, Small Business Administration (SBA) loans and, depending on their net worth, investments from capital markets based on the size or scale of the business and its unique value proposition. In this stage, the best-laid plans and presentations will fall on deaf ears if the entrepreneur isn’t in front of a receptive audience. In the vast majority of cases, raising capital isn’t about what you know; it’s about “who” you know and their willingness to participate in your vision.
Not a marketing maven? This is where business owners can benefit by bringing in investment banking professionals to guide the capital raising process. When seeking funds in the form of debt or equity, an investment bank can provide insight, experience and most importantly, a network of contacts that trust their recommendation.
Access to capital is critical during the growth stage of a small business, so don’t wait until it’s too late. Owners of small to medium-sized businesses can always use additional funding to fuel innovation, research, development and even to weather a downturn in market conditions. The growth stage, however, can be a particularly challenging time to raise capital because while the entrepreneur can see the potential, they may face skepticism from traditional lenders and potential investors. At Allegiance Capital, we pool together our team’s network to access the best debt or equity solution providers who offer the most synergistic partnership. This process allows entrepreneurs to continue to focus on operating their businesses, rather than falling into a “hamster wheel” scenario where raising capital becomes the business owner’s full-time job.
Losses and Negative Cash Flow
While unpleasant to discuss, it is wise to give prior consideration to the possibility of a loss stage. Whether a result of business cycles, management or cost overruns, entrepreneurs especially need to be prepared to raise capital during this stage in spite of economic downtrends.
Many entrepreneurs may not be aware that Allegiance has access to “distress” lenders who will provide equity injections or debt solutions with the knowledge that the company needs funds to be turned around. Such lenders entrust an investment bank like Allegiance to provide the necessary analysis to show that the business has potential to thrive and overcome its temporary downturn. The evaluation of a business by investment banking professionals can even identify strategic advantages or unique selling points to business owners and potential investors or lenders, highlighting a capability that may have been overlooked. Business owners place a great deal of attention, as they must, on operational matters in the workplace, so they may not notice the alternatives available to them for future growth.
Working with Professionals
The primary role of an investment bank like Allegiance Capital is to help entrepreneurs develop an exit strategy, to help sell their businesses and achieve premium financial benefits beyond their expectations. However, not every business is immediately ready for this type of transition. By helping to raise capital and creating a desirable ‘structured package’ over the course of 12 to 36 months, Allegiance Capital can secure a value proposition in the marketplace and enable far more competitive sale terms for the business than its owners ever thought possible. Raising capital can be especially important for business owners contemplating a sale. Just because a business owner is ready to sell doesn’t always mean that the business itself is ready to be sold. It is important to “structure” the business in order to create an appealing package, highlighting its strengths and unique selling points for potential buyers.
In addition to utilizing its resources to raise capital, an investment bank like Allegiance has access to top tier CPAs, analysts, attorneys, public relations professionals and more who can prime the assets of business for a sale all the while ensuring confidentiality during this process. In addition, we can have professionals certify and train the business’s staff, improve the marketing and sales procedures and processes, streamline the financials, all helping to position the business in the marketplace so that it achieves a premium sales price. At Allegiance Capital, we are incentivized by performance, so our interest is directly aligned with the seller’s profitability.