Companies often choose to use senior debt capital because of the variety of advantages it offers over other types of capital. Here are 5 key benefits of senior debt capital:
1. Cost – Senior debt capital is a cost-effective way to finance a company. It is the debt in a capital structure that gets paid first, so it is less risky from a lenders point of view, making it the cheapest form of funding for a business. Because of this, senior debt capital is a practical choice for financing operations as well as more strategic initiatives. If a company takes on low cost debt and reinvests it into relatively high return capital projects, they are going to create more value for the business.
2. Growth – Senior debt capital allows a company to invest in its business in excess of cash-on-hand. When a company is growing rapidly, they are typically consuming capital as opposed to generating cash flow, thus, they don't have extra cashflow to invest. However, bringing on a senior debt capital partner can enable companies to pursue growth opportunities that they may not otherwise be able to, such as making an acquisition.
"Senior debt capital can add value to a company mainly in that it allows a company to continue to invest in its business, in excess of the cashflow that's coming off of the business." - Brooke Ansel, Director, Pricoa Private Capital
3. Control – As opposed to taking on equity, senior debt capital allows a business owner to invest in their business, continue to grow and add value to their business, while also maintaining ownership.
4. Flexibility – Senior debt capital has the flexibility to be sourced and placed on standby for the unexpected, whether it's in the form of a revolving credit facility or a shelf facility. It is important for companies to maintain liquidity for the known and for the unknown.
5. Volume – The senior debt market is the largest of all the capital markets. As you work your way down the capital markets into more junior levels of capital, there is simply less capital available. The capital markets are the deepest and most liquid at the senior debt level because that is where most dollars are invested by institutional investors and banks. Thus, companies can access deeper pools of capital from the senior debt market.
If a company is going to substantially increase in scale, they need external capital, and utilising senior debt capital is the most affordable, flexible and effective way for them to improve the growth rate of their company, while maintaining control. Additionally, your senior debt lender should be there for you for the operational side of the business but also as a financial partner to help you grow and support you over the long term.
Interested? We would be happy to discuss how senior debt capital could work for you.
Josh Shipley is a Managing Director for our Milan and London Corporate Finance offices. He oversees private placement activity in Ireland, Italy, Portugal, Spain, and London, consisting of senior debt, mezzanine debt, and private equity investments. Prior to this role, Josh oversaw the private placement and mezzanine activity in our Mediterranean Europe, Australia,* and New Zealand territories. He joined PFI in 2001.
Josh received a BA from Illinois Wesleyan University. He holds the Chartered Financial Analyst® designation.
*Operates through PGIM (Australia) Pty Ltd.
Ed Jolly is a Managing Director in Pricoa Private Capital’s London Corporate Finance office. He oversees the private placement and mezzanine activity in our Northern UK and Ireland territories. Prior to this role, Ed led a team responsible for marketing, originating and managing private placement and mezzanine investments in Ireland, the Midlands, Northern UK and London. He joined PFI in 2006.
Ed received a BS from Bristol University.
Bill Engelking is an Executive Managing Director, overseeing Pricoa Private Capital’s Atlanta, Chicago, Dallas, and Minneapolis Global Corporate Finance offices. Prior to this role, Bill oversaw the private placement and mezzanine activity in Pricoa Private Capital’s U.S. Great Lakes territory. He holds board seats and observer rights with several portfolio companies. Bill is also a Partner of PGIM Capital Partners, the middle-market mezzanine debt and equity fund management business sponsored by PGIM Private Capital. He joined PFI in 1997.
Bill received a BBA and an MBA from the University of Wisconsin at Madison.
Brooke Ansel is a Director in Corporate Finance for Pricoa Private Capital, located in Dallas. She leads a team responsible for marketing, originating and managing private placement and mezzanine investments in Arkansas, Missouri, Oklahoma and Northern Texas. She joined PFI in 2014.
Brooke received a BBA from the University of Texas at Austin and an MBA from Southern Methodist University Cox School of Business.
Ashley Dexter is a Vice President in Corporate Finance for Pricoa Private Capital, located in New York. She leads a team responsible for marketing, originating and managing private placement and mezzanine investments in Atlantic Canada, Connecticut, New Jersey, Eastern Pennsylvania and Quebec. Prior to this, she led a team responsible for marketing, originating and managing private placement and mezzanine investments in Georgia, North Carolina, South Carolina and Tennessee. She joined PFI in 2005.
Ashley received a BBA from the University of Georgia. She holds the Chartered Financial Analyst® designation.
Tom Molzahn is a Director in Corporate Finance for Pricoa Private Capital, located in Chicago. He leads a team responsible for marketing, originating and managing private placement and mezzanin investments. He joined PFI in 2007 as an analyst then returned in 2014 after business school.
Tom received a BBA from the University of Wisconsin at Madison and an MBA from Northwestern University’s Kellogg School of Management. He holds the Chartered Financial Analyst® designation.
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