Earlier this year, First West Capital’s Associate Director, Jason Sellakumar, received a call from a commercial banker who had a client looking to acquire a business. With the equity put up by the entrepreneur, there was still a gap in capital needed between what the bank could loan, vendor financing, and the purchase price of the acquisition. After meeting with the purchaser and assessing the business, First West Capital was able to provide the funds to make the acquisition without having to raise equity and give up control.
The entrepreneur had a strong understanding of his market and how he would grow the business post-acquisition. Furthermore, he had a strong management team to support him. Both the commercial banker and the entrepreneur knew that this would be an ideal fit to leverage junior capital in order to close this transaction and that First West Capital was the right partner to get them there.
You may have a client that is in the same position, or you may be an entrepreneur who is looking to grow and needs a lender who can act as a sounding board and provide you with the financing you need to grow without having to give up an equity stake in your business.
Here is Jason’s easy guide for those looking to better access the First West Capital fit:
We work with growth-focused organizations
First West Capital works with mid-market businesses that are actively pursuing growth, an acquisition or are looking to transition their business. Our ideal client operates a business with strong cash flows and has clearly identified a target opportunity that requires financing. Their objectives are long-term oriented, and they seek to retain control of the business without having to bring in business partners.
Strong financial reporting
In order to secure financing, a business needs to demonstrate the ability to produce strong financial reporting to effectively communicate the company’s financial journey. We put less weight on the amount of available collateral and instead concentrate more on the business’s working capital and cash flows.
Financial reporting serves as an underlying assessment of the health and needs of a business.
Looking closely at the line items that calculate working capital and cash flows, the company’s financial picture becomes clearer and decisions for the long-term sustainability of the business become more evident. These figures will inform the optimal loan size to avoid over-leveraging the business. Ultimately, we want to work with entrepreneurs who are looking for a partner to help them make sound financial decisions and take calculated risks with them in order to grow.
Leadership with proven business acumen
The business acumen of the leadership team is critically important. We look for a management team that deeply understands their financials and has a proven track record of sound business decision-making, which will be reflected in their historical financial reporting and subsequent business objectives. This business acumen comes into play in validating long-term strategy outlook and the basis for securing a junior capital loan.
Whether a company’s finances are run by a two-hatted CEO/CFO or involve a multi-faceted team, a deep understanding of its competitive market position and the ability to dissect financial projections are key in our client qualification process.
Resources for entrepreneurs, like you
Want to learn more about how we help ambitious entrepreneurs grow their businesses? Read about how to leverage junior capital for growth and our personal list of seven must-read books for entrepreneurs.