Businesses today need to raise optimal capital through various financial instruments to survive and grow in highly competitive markets. It is imperative for investment banks, asset funds, and corporate firms to assess and manage debt financing. The ability to raise funds is directly linked to a company's growth, ability to acquire new assets and accelerate expansion.
While these organisations house sophisticated financial teams, their competency in navigating the debt market falls short, and often necessitates specialised expertise. Navigating the complexities of various loan options, terms, and repayment options can often eclipse the strong vision they have for their enterprise's future. This is where employing the services of a debt advisory becomes indispensable. Their deep understanding of the market and strategic guidance empowers corporations to make informed decisions, optimise capital structures, and achieve their financial objectives.
Here are 7 reasons why businesses should consider hiring debt advisory services:
- Capitalise on Market Expertise
Debt advisors are adept financial strategists who have a thorough understanding of and nuances of various debt instruments. From banks to private equity, to mezzanine financing, they can help businesses reach out to the right lenders. They also have an in-depth knowledge of market trends and industry-specific financing solutions that allow them to develop tailored, low-risk debt strategy that aligns perfectly with specific business goals.
- Financial Modeling/Risk Assessment
Debt advisors analyse a business' financials to determine optimal debt capacity. Based on this, they develop detailed financial models and projections on how a loan can impact profitability and growth. They identify potential risks such as interest rate fluctuations and covenant violations, and craft optimal strategies to overcome these risks. Advisors also help protect businesses from unexpected interest rate swaps and hedging instruments, which can help manage the risk of rising interest rates.
- Lead Negotiations with Confidence
Debt advisors can leverage their existing relationships with lenders to help businesses secure competitive interest rates, outline flexible repayment schedules and terms, and ensure favourable covenants. They also leverage their experience and expert negotiation skills to help outline long-term flexible loan terms that align with the business's risk tolerance and growth objectives.
- Streamline Application Process
Applying for a business loan involves crossing bureaucratic hurdles of mammoth proportions. For someone who is not well-versed in such processes, managing this can be quite a challenge. Debt advisors can help enterprises streamline the complex loan application processes by curating the necessary information and presenting it in a manner that is compliant with the lender's expectations. They can also bridge the communication gap between the lender and the business, thereby streamlining the approval process. By optimising the transaction lifecycle, advisors can free up internal resources to focus on key business activities.
- Long-Term Debt Management:
Business debts are often long-term commitments with the repayment terms spread across many months, or sometimes even years. Effective debt management is essential for long-term financial health and growth. Debt advisors can help draft a comprehensive debt management plan that is aligned with the business's long-term growth. They will also help implement a suitable strategy for managing existing debt and ensure a smooth integration of the new financing into the capital structure. By monitoring key financial ratios and metrics they help ensure compliance with loan covenants, thereby maintaining the sound financial health of the company.
- Regulatory and Legal Compliance:
Adhering to the complex debt financing regulations and necessary legal requirements is very important. A debt advisor can assist in interpreting these legal documents and convoluted loan agreements to mitigate potential legal risks associated with debt financing.
- Expanding Access to Capital
Diversifying funding sources can help optimise capital structure and mitigate risk. Relying solely on traditional bank financing can be restrictive and time-consuming. Debt advisors can help explore alternate avenues of financing, such as asset-based lending, invoice factoring, and mezzanine financing. Such a diversified funding strategy can aid businesses in accessing capital more efficiently and reduce dependency on a single lender.
Acuity's Restructuring and Debt Advisory services are aimed at helping businesses secure optimal funding that is aligned with their risk tolerance and growth objectives. This strategic partnership empowers businesses to make informed decisions about their capital structure and drive long-term success.
