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Capital Raise Advisory: How to Raise Debt & Equity Capital

Business owners and managers often face frustrating and challenging issues related to meeting the capital requirements of a company. Typically, ownership and management understand the operating initiatives that need to be accomplished to move forward, but are impeded by financial constraints or other non-operating difficulties. Allowing an investment bank such as Matrix to assist in evaluating capital alternatives allows management/ownership to remain focused on the business as additional capital is secured.

Below we have assembled information and resources to help business owners consider their options.

  • What kind of capital options are available?
    Will they own a part of my business? There are a number of financial instruments at the disposal of investors. Depending on the business, transaction dynamics, and the shareholders’ goals, it quickly becomes apparent which of these instruments is most appropriate for a given transaction. Broadly speaking, capital raises can take the form of debt raises (senior or subordinated debt) or equity raises (preferred or common). Each has its distinct advantages and disadvantages. The variety and uniqueness to each enables business owners to use a “menu approach” to find the capital solution most appropriate for their situation. Often times there is a blend of capital raised which might include more than just one type. Investment bankers are always seeking the least expensive capital available to minimize or avoid dilution.
  • How much does the capital cost?
    The cost of capital is different based on which form of capital is selected from the “menu” (discussed above). Debt instruments typically charge interest that affects the profitability of a business.  The return to the debt investor is often fixed; but has priority claims to cash ahead of the company’s ownership. Alternatively, equity investments (preferred or common) take a subordinated position in the capital structure (paid after the interest and debt), but participate in the upside of the business alongside fellow shareholders.
  • How long will a transaction take?
    Matrix generally estimates a typical capital raising process will take approximately six months to complete, from the moment we receive preliminary information about the company to the time when all legal documents are fully executed. However, the time it takes to complete a capital raise can vary substantially based on a number of factors. Similar to a sale process, the process assumes multiple capital providers are vying to be selected as the ultimate partner. Matrix’s capital raising process is designed to be exceptionally efficient and has helped many businesses and their owners quickly raise the capital they need under optimal terms.
  • Will they try to change my business?
    While some investors are more hands-on than others, generally speaking, your business shouldn’t change much, if at all. There may be minor tweaks such as additional reporting requirements or the formation of a formal Board of Directors, but it should largely remain business as usual. If the investor didn’t believe in the business you were running and your vision for the future, they likely wouldn’t have provided you with capital in the first place.

If you have any questions regarding the information provided above, please feel free to contact:

David W. Shoulders
Managing Director
Matrix Capital Markets Group, Inc.
(804) 591-2034
dshoulders@matrixcmg.com

The contents of this publication are presented for informational purposes only. While Matrix Capital Markets Group, Inc. and MCMG Capital Advisors, Inc. (“Matrix”) believe the information presented in this publication is accurate, this publication is provided “AS IS” and without warranty of any kind, either expressed or implied, including, but not limited to, the implied warranty of merchantability, fitness for a particular purpose, or non-infringement. Matrix assumes no responsibility for errors or omissions in this publication or other documents which may be contained in, referenced, or linked to this publication. Any recipient of this publication is expressly responsible to seek out its own professional advice with respect to the information contained herein.

What our Clients Are saying

  • “We appreciate the guidance and efforts of the Matrix team who worked tirelessly to bring this transaction to a close. They did an excellent job putting the transaction together and we were very pleased with the outcome.”

    Charlie Gonzales, Managing Director
    Albion Investors
  • “I would like to thank the team at Matrix for their professionalism and guidance on this transaction. They provided senior level attention throughout the entire process, and successfully conveyed RCC’s strong history and future growth prospects resulting in a value that exceeded my expectations.”

    Bob Hoover, President and CEO
    RCC Western Stores
  • “Selling one’s life work is a very challenging and emotional decision. Cedric and the Matrix team were extremely helpful in navigating this process. Their support and help, blending together the desires of us and the buyer, were invaluable. We thank them immensely. I would also like to thank the entire Apache team, our employees, customers, and suppliers. Your dedication was our success. Additional thanks goes to Jim Castle for having the faith and foresight to become partners with a 23-year-old over 27 years ago. Finally, a special thanks goes out to my lifelong friend, teammate, and brother, Willie Castle, whose decision to join us 12 years ago enabled us to take Apache to a new level. I wish my late father was around to see this”

    Christopher Ohl, President & Managing Partner
    Apache Oil Company, Inc.
  • “I greatly appreciate the service that Matrix provided finding the best purchaser for the motor fuel portion of my business. I chose Matrix because of their expertise in completing transactions in the fuels distribution space. I would recommend Tom, Cedric and Matrix to anyone ready to sell their business.”

    D.W. Porto, President
    Alta East, Inc.
  • “Matrix did a thoroughly professional job throughout the process and went above and beyond my expectations. We are very pleased with the results achieved.”

    Ben Wafle, President
    Quarles’ Retail Division