Growth and internationalization

Are you convinced that your products and services would be successful in foreign markets? Or do you think that your business model lends itself to expanding your value chain? In short: You have no shortage of ideas to grow your business further – you just lack the necessary capital?

Breaking into a new market or setting up a new production facility is usually a lengthy process and requires substantial investment. Established debt financing instruments are rarely adequate. Too short-term, the conditions too rigid – and sometimes just not an option because the total investment cost of the project is too high. Some lenders can also be put off by the uncertainty involved in a long-term investment – especially if the plan is to break new ground.

But do not let this slow you down in your growth plans. With equity capital (via a majority or minority shareholding) or mezzanine financing, you can also finance long-term investments. However, there are a number of aspects to consider. Basically, both instruments strengthen your equity base – which in turn can open up new options for you in terms of debt financing.

The benefit here lies in the flexibility – mezzanine financing, for example, can be tailored exactly to your needs. Supposing, for example, that establishing yourself in a new market promises to be very lucrative but that it will take several years before sales revenues can be generated. In a situation like this, your mezzanine financing needs to be structured so that any repayment is deferred to the end of the term.

If you want to make big changes to your service offering – for example, by adding a completely new product category – the business planning can also be difficult. If it is not at all clear when and to what extent the investment will generate a positive cash flow, then it is advisable to partner with an equity investor – for example, via a minority shareholding. The equity investor carries the same risks as you do.