Most business owners, CEOs, and CFOs are familiar with traditional bank lending when borrowed capital is required, and likely receive regular solicitations from, or perhaps have existing relationships with, a handful of local banking institutions.  Many executives, however, are less familiar with an alternate group of loan providers, a group often referred to as ‘credit funds’. 

Credit funds are institutions which make direct loans to private companies and are not subject to the strict government lending requirements of their bank counterparts.  As a result, credit funds can typically provide loans and debt capital at considerably more flexible terms. Whereas bank lending may be constrained by asset collateral or a conservative multiple of cash flow, credit funds are oftentimes more comfortable lending larger amounts of financing, as they are not regulated in the same way as banks.  In addition, the speed at which the loan is paid back, or amortized, tends to be slower, i.e., more ‘borrower friendly’ with credit funds. 

For example, a credit fund may request 1-5% of the principal to be repaid each year, while a bank may require as much as 15-25% repaid annually.  Moreover, the financial covenants, typically in the form of maximum leverage and minimum coverage ratios, tend to be higher and lower, respectively, with credit funds, all translating to more ‘default cushion’ when/if performance slips.  All this flexibility does come with a price, however, as interest rates for credit fund loans can be slightly higher, so it takes careful consideration of your particular situation and objectives as well as a financial advisor who can help you evaluate all your financing alternatives.

At ButcherJoseph, we regularly advise CEOs/CFOs, family offices & independent sponsors with investment platforms, and small private equity firms regarding their financing options and raising capital.  Since 2011, we have raised over $3B in senior and subordinated debt and maintain long-standing institutional lender/buy-side relationships. The robust volume of recapitalizations and refinancings we lead for our clients allows us to navigate complex financing situations or to assist in instances when your existing banking relationship perhaps falls short.  Above all, with our experience and rich connectivity within the lender universe, we can supplement your existing corporate finance capabilities to secure a financing solution at terms that are most optimal for your company.

“ButcherJoseph’s ability to move quickly to source and negotiate credit facilities is a clear competitive advantage to working with their organization specifically during this process,” says Kimberly Clark, Vice President of Sales and Marketing at ITR Economics. “The timing of capital investments must be based on the Business Cycle Phase™ roadmap to achieve the most ROI, and often, the timing is counterintuitive. ITR Economics’ partnership with ButcherJoseph is crucial to executives looking for debt financing because we are actively educating business leaders on not only different, more appealing finance options, but also, the right time to make that investment.”

If you are interested in learning more about how we can help you with your financing needs, fill out our contact us form or reach out to me directly at david.lake@butcherjoseph.com or at 314-720-6385.

 

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