Your Stage 2 Advisor can help you align your capital structure to your business’s ongoing needs.
Understand your balance sheet
Most of the companies we work with either have too much or too little debt in their company. Business owners often don’t understand what the proper use of debt is. Those with too little debt will keep large amounts of cash in the company and pay for everything with cash. Emotionally this is a great way to live. However, when it comes to getting an adequate return on your business, it often leads to not having money in the right place when it’s time to leave your business.
Understand the cost of capital
Leaving money in your business is very expensive. If you use an appropriate amount of debt, you will be able to remove money from your business and use this capital in other ways. If your business is well run, your bank will be more than happy to loan you the money that you took out of your business.
Become financially literate
More often than not, the business owners we work with don’t know if they are using their business cash in a manner that helps them reach their goals. Understanding how banks think about your business and knowing what range your business financial ratios can have a large effect in your business and the independence you might want in the future. We are always happy to have a conversation about your particular situation and help you learn not only what your banker is looking for, but also look for the sweet spot for your own business.
Review your banking relationships
At least every few years, you should have a conversation with other banks that serve your industry and your community to find out what they have to offer. You may be surprised to learn that different banks have different priorities, and that their goals change over time, sometimes to your benefit.
Selected Tools:
- ESOP Recapitalization
- Preferred Stock Recapitalization
- Corporate Recapitalization
- Asset Based Borrowing
- Mezzanine Debt Structure
Articles
Increasing the Value of Your Business
Changing Your Relationship with Your Business
The above tools, techniques and resources are listed as examples. Your Stage2 Advisor will work with you to identify the right strategies for you depending on your specific life goals and financial goals.