Securing adequate, flexible, low-cost capital, at the right time and in the right sequence, to fund high-return projects and growth are crucial to creating business value.
Are you facing any of these issues?
We see these issues all too often. Not from low-performing companies that lack ambition, but from leaders of very successful, inspired, fast-growing businesses. Of the 500+ CEOs we’ve spoken with, almost half are dissatisfied with their current lending relationship.
We see three failures in the majority of cases, often at the same time:
Each time we execute a competitive process to solicit lending proposals for our clients, the range of amounts offered, pricing and flexibility is staggering and in most cases, each lender’s first proposal is not their best.
If you own a high-performing company, your equity is very expensive capital. Many of our clients expect annual equity returns greater than 40%. Maximizing your funding availability from credit and other non-dilutive capital sources will typically reduce or eliminate the need for equity investors. It will at least delay an equity raise until the equity valuation is much higher than it is now, minimizing dilution of your ownership.
On average, the Canadian CEOs we surveyed since 2018 expect a 30-month payback on their capital projects, which is a compound annual return of more than 35% on these investments. How many of these same CEOs say that they would not borrow money at 8% (about 5% after-tax) because it’s too expensive? Almost all of them.
The CEO and CFO of Cole were frustrated with their bank. They were consistently operating at their credit limit, making it difficult to fund working capital as the company was growing quickly. Valitas prepared marketing materials and canvassed over 100 potential lenders to maximize competitive tension, built a robust monthly credit model with a bottom-up forecast of the company’s performance to assess leverage capacity and predict covenant choke points, and maximized optionality by combining various senior and junior debt proposals (7 lenders and 18 possible combinations). As a result, Valitas arranged financing for Cole that was higher than the top end of the range we indicated prior to contacting lenders and that exceeded its prior financing commitment by 87%.
Our global capital networks include almost 3,000 private equity funds and 320 banks and credit funds that are focused on Canadian private companies. Approximately 90% of our equity sources and 85% of our debt sources are located outside of Canada.
We have tracked our experience with each capital source in our proprietary database including their criteria, internal approval process, timelines, preferred structures, and pricing. Our clients benefit from our relationships, privileged access and understanding of each capital provider’s internal limits. Furthermore, we bring gravitas to our interactions with these institutions and investors, ensuring they are treated with respect.