Debt, Equity, or Both?
"What type of financing is better for me?"
A question like the above may not have a simple answer as there is no exact recipe that will work for everyone. Different approaches are generally taken to decide if all debt or all equity (or a mix of the two) will serve the parties involved in a certain situation/project.
For example, a start-up is usually not self supporting in its infant years; therefore, the need of that start-up is for equity to enable growth and not drown the company in debt.
At the opposite spectrum, an established company that may want to retain ownership with a healthy asset base and yearly profit performance may in a better position, and open to the possibility, to take on more debt.
At Capital Corp Merchant Banking, the most advantageous mix of debt and equity is customized for each different situation. This requires some sophistication in financial modelling and years of experience and this is what Capital Corp Merchant Banking brings to the table, among other things.
Knowing what the company or project’s worth on Day One is crucial to determining the course of action. The goal is to find the debt and equity mix that provides the highest expected value in the short and long term.