In turbulent times, accessing capital can be a significant challenge for midsize companies with annual revenue ranging between $25 million and $1 billion. While past capital providers may have been reliable in the past, they may not always provide the best deal in the current environment.
This means midsize companies need to explore alternative avenues for accessing capital.
One solution to improve the velocity of successful capital transactions in the middle market is the use of new tools that facilitate access to secure information exchange. This allows the parties on each side of the transaction to more easily share information and build trust.
It's important to note that in times of crisis, capital reallocation can be a critical strategy for businesses. However, many companies don't appear to be using this lever amid COVID-19.
In a BCG survey conducted in May 2020, only 38% of companies said they were modifying investment plans to target new growth drivers, and only 21% were investing in new business models.
Therefore, it's important for midsize companies to be proactive in seeking out alternative sources of capital.
One way for midsize companies to access capital is through private equity firms. Private equity firms provide capital to midsize companies in exchange for equity or ownership in the company.
These firms typically have a large pool of capital and are often willing to take on more risk than traditional lenders, making them a potentially attractive option for midsize companies.
Another option for midsize companies is to consider alternative lenders, such as online lenders or crowdfunding platforms. These lenders may be more willing to provide financing to midsize companies that may not meet the strict criteria of traditional lenders.
However, it's important to carefully consider the terms and fees associated with these types of loans before pursuing them.
Finally, midsize companies can also explore government-backed financing programs, such as the Small Business Administration's (SBA) loan programs.
These programs provide financing to small and midsize businesses and may offer more favorable terms and conditions than traditional lenders.
In summary, midsize companies facing turbulent times need to be proactive in seeking out alternative sources of capital.
Private equity firms, alternative lenders, and government-backed financing programs are all potential options to consider. It's important to carefully evaluate the terms and conditions of each option before pursuing them, and to work with trusted advisors and professionals throughout the process.