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Frequently Asked QuestionsBack to FAQ'sWhat is required to obtain 'Equity' funding for my business?To be successful, a company must have a clear and compelling story. The business needs to be able to articulate the company's strengths and sustainable competitive advantage quickly, and how that translates into cash flow. In short, the most marketable businesses tend to be those with solid cash flows, lower capital expenditure requirements, and products and services in markets viewed as growing. It is important to have financials that tell a story; a business infrastructure; a proven, capable management team; a solid business strategy; a coherent growth approach; a diverse customer base and specific objectives for the capital, such as whether it is going to provide some liquidity, but also growth. From an overall business and operational perspective, investors will essentially want to understand the following:
As part of the process of obtaining financing, our firm will review a client’s historical financial information; assess the validity of their projected financial statements; and evaluate their business plan. Upon completion of that process, our firm will then determine from its network of relationships and extensive database the 'targeted' financial institutions most likely to provide the financing; contact each financing source; and assist with the negotiations. Upon acceptance of a formal financing proposal, our firm will work closely with the client's attorneys and accountants to complete the negotiation of the final financing agreement and consummate the transaction. Investors typically will expect to go through a comprehensive due diligence process and the management team should be prepared to discuss the financial metrics of the business, such as cash flow and EBITDA, as well as working capital and capital expenditure requirements. Many financial institutions also identify with opportunities where operational improvements need to be made, emerging markets are to be met, and consolidation needs to occur. Any business plan that includes additional growth opportunities such as acquisitions will further tweak the interest of private equity investors, who are going to be looking at how to leverage the target company and make it grow. Our firm is constantly in contact with the key decision makers at varied financial institutions to discern the latest trends and financing developments. At Lexington, we provide full-service placement capabilities to lower middle-market companies and we customize solutions for our clients to minimize dilution and optimize their capital structure.
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