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Capital Insights: How bankers can win more business and share of wallet


Admit it; some of you believe that outside capital represents a competitive threat to your business. In fact, sub-debt can help you grow existing client relationships, attract new customers, manage portfolio risk and save time. Bankers are our best referral source and there are many benefits to building a win-win-win partnership.

Here are a few compelling reasons why sub-debt is a valuable tool for bankers.

Grow your accounts

Have you ever had a client who wanted to borrow more, only to have credit decline the deal because although cash flow was great, there simply wasn’t enough collateral?

When companies grow faster than traditional debt products can accommodate sub-debt can be used to top up facilities provided by the bank. As a result of the inter-creditor documentation we have with financial institutions, sub-debt is almost always treated as equity by the credit room. This treatment addresses challenges associated with leverage and makes it possible for you to do more business with your existing clients.

High leverage can also be an issue in the case of buyouts or acquisitions where the goodwill created by the transaction reduces tangible net worth. Sub-debt, because it is treated as equity, offsets the negative impact of goodwill.

Finally, sub-debt acts as a placeholder – ready to be refinanced by you at maturity. This gives you the opportunity to further increase your share of wallet down the road.

Win new business

It’s competitive out there. Winning new business requires best-in-class financial products, thinking outside the box, and providing creative solutions to increasingly complex and fluid customer needs. Knowing when to include sub-debt in a capital structure can be the difference between winning a new client and losing them to the competition.

For example, many of our long-time banking partners are able to attract new clients and convert the relationship from a mid-market to a corporate finance account, thanks to the growth they were able to achieve with the additional funding.

Sourcing alternative solutions builds trust and makes you a valuable asset to your clients, which equals more closed deals.

Manage risk through teamwork

At First West Capital our approach is collaborative and we support you in structuring the deal through due diligence as well as in monitoring the loan post-disbursement. We’re the second set of eyes that can make a big difference in putting together a deal that works for everyone, and we help to ensure that adverse changes in the business are quickly identified and addressed.

However, choose your partners carefully. Look for people who you can deal with locally and face-to-face; ideally they are based in the same market as you and have a good track-record. Stay away from people who are just looking to do deals and keep investors happy.

At First West Capital we are flexible, agile and less tied up in process and policy, which are important attributes in a capital partner. The outcome is a highly customized solution for borrower and lender, and faster turnaround times. Not to mention good old fashioned teamwork creates efficiencies and eases your work load.

Cultivating a partnership with a reliable, resourceful and responsive capital provider like First West Capital can help every banker keep, grow, and win new business.

Capital Insights is a regular series on financial industry trends and challenges written by Kristi Miller, vice-president and co-founder of First West Capital. First West Capital specializes in financing small and medium-sized businesses, in amounts of up to $10 million, across all industries in Western Canada through customized subordinated loans and mezzanine financing.