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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

  • “It has been a pleasure to work with Sean Dooley and Spencer Cavalier and the entire Matrix team over the last few months to successfully undertake and conclude this project. Their professionalism and expertise has exceeded any expectations that I might have had on how this endeavor might go. And I want to compliment the folks at SMO and The Wills Group as well for their outstanding cooperation to diligently consummate this project. Finally, I want to express my deepest appreciation to the employees of Jiffy Mart and Tevis Oil for their wonderful efforts to create and sustain a wonderful group of stores in our community over the past thirty years.”

    Jack Tevis
    Tevis Oil, Inc.
  • “Matrix ran an orderly process, allowing us to realize our business and financial objectives.”

    Lock Wills, President and CEO
    The Wills Group
  • “We look forward to partnering with Vance Street and pursuing several exciting strategic initiatives.  We also appreciate the tremendous efforts of Matrix throughout the transaction.  The depth of their team and the attention our transaction received was beyond our expectations.”

    Charlie Poe, President
    Southern Filter Media LLC
  • “Jones & Frank hired Matrix Capital because they promised us strong interest from a broad universe of Private Equity investors. We were very pleased with the reception we received in the financial community and are thankful that we had Matrix representing us. They were highly professional, thorough, and maintained strong control over the recapitalization process. I would be willing to share my endorsement with anyone that was interested.”

    Sterling Baker, President & CEO
    Jones & Frank Corp.
  • “Our family has owned and operated CWD for over three decades, and in that time, one of the best decisions we made was to hire Matrix to represent us in the sale of our business. We were extremely impressed by the level of attention and commitment we received throughout the transaction process, and would highly recommend the Matrix Consumer and Industrial Products Team.”

    Patrick Pluck, Vice President
    Connecticut Warehouse Distributors, Inc.