Accessing Capital: How CEOs are Finding Financing

One of the hottest tickets at Axial’s recent Concord conference was “Accessing Capital: How CEOs are Finding Financing,” a morning session focused on financing options for business owners. Before a standing-room-only crowd of mostly middle-market CEOs, panelists discussed broad financing trends, tips for executives seeking capital, and pitfalls to avoid in the funding process, among other topics.

A Competitive Marketplace

David Acharaya of AGI Partners LLC, who moderated the discussion, led the panel off with a question about the broader trends being observed in the lending market. To that, Walter Schuppe, SVP and Director of Eastern Region at CapitalSource, promptly replied, “It’s a competitive marketplace. There’s more money in the market right now than there are deals to do.”

This sentiment aligns with trends on Axial. In the last 30 days alone, pricing power indices on the network are up across the board. These measure the leverage those seeking capital have over those providing it by way of comparing supply and demand. Any time capital available exceeds capital in demand, those who need capital attain pricing power.

The other panelists agreed that the lending landscape has grown more competitive. Daniel Krewson, Senior Vice President at debt advisory MultiFunding, cited more discerning borrowers as a possible cause.

“Whether it’s debt or equity, the right partner will be instrumental in making (the capital) work for a CEO,” said Krewson, explaining why many companies are taking their time deciding on a lender. Schuppe took the idea a step further, stating that, “Lending is a commodity, and your banker is just another supplier. If I’m a CEO, I’m asking, ‘What else can (my lender) provide?’” According to the panel, in addition to capital, lenders can often offer operational expertise and pointers for improving your balance sheet, along with other value-adds.

Avoiding Common Pitfalls

After discussing ways in which CEOs have gotten better at sourcing debt (knowing their options and bringing stronger financial acumen, among others), the conversation turned to areas where many still have room to improve. Branden Harper, Director of Investments at Lighter Capital, brought up high-interest rate loans as products to avoid. “Companies, especially those on tough times, will take merchant cash advances or other credit lines that end up being burdensome and ultimately dragging down growth. These products might be taken on during a cash crunch, but can ultimately make it harder to secure additional financing later on. That’s a pitfall to avoid when taking on debt.”

One pitfall all panelists strongly agreed upon was the tendency many CEOs have to withhold bad news about their business until later in the loan-approval process. DeSantis summarized the group’s advice succinctly: “Don’t hide the problem,” he said. “It’s bound to come up later.”