When raising capital, the focus is often on where to get the money. In fact, the right choice starts with a different question: what risk is the owner prepared to take, and how much control do they want to keep?
Debt works when cash flow is predictable enough and the company can service its obligations without stifling growth. Mezzanine can be a suitable middle ground when the company needs more flexible capital and is prepared to pay a higher price for it. Equity is the right fit when growth calls for sharing risk, a strategic partnership or a stronger balance sheet.
The wrong capital can be more expensive than no capital at all. Too much debt reduces flexibility, equity raised too early dilutes the owner, and a poorly structured deal can limit the next steps of growth.
A good capital structure supports the strategy; it does not replace it. Before raising money, it is worth being clear about which growth path creates the most value and which type of capital supports it best.
To decide, compare the total cost of the financing, the repayment schedule, collateral requirements, potential dilution and the impact on the owner’s decision-making rights. It is also worth stress-testing cash flow for a scenario where sales or margins fall short of plan.
WIZEN helps assess capital requirements, build the financial model and choose the right financing structure for growth.