How Can Alternative Lenders Help Companies Achieve Growth Goals?
VION has spent more than a decade providing alternative financing to help companies grow or restructure their businesses. Alternative lending structures often provide flexible payments allowing companies to reinvest cash flow from operations into growing their business rather than repaying debt. So, what makes financing from VION different than obtaining a loan from a commercial bank?
Banks make money by collecting interest on loans made to their customers. They also require customers to repay those loans on pre-determined schedules, considering changes in working capital that occur when growing or restructuring a business. While banks have a lot of capital to lend, they are regulated financial institutions limiting their ability to provide “patient capital” in the same way alternative lenders like VION can. Growing companies or businesses in transition, often have inconsistent monthly cash flows and may not be able to meet the bank’s minimum financial requirements. VION is able to be more patient by focusing on the underlying value of the business and its assets. Alternative lending acts like equity in many ways by not requiring the owner to give up an ownership stake in the business, providing the flexibility necessary to execute growth or turnaround plans and making it cheaper than raising equity.
Alternative financing from VION provides more than traditional banks. Commercial banks will very rarely advance 100% against any asset. Banks expect to have an equity cushion beneath them in the capital structure of the business. If debt comprises 80% of the financing need, the balance needs to come from more expensive junior capital, subordinated debt, or equity. While bank financing is attractively priced, the cost associated with the balance of the financing can be very expensive and time consuming to negotiate. A one-stop alternative from VION can meet 100% of the financing need and close faster than multi-party financing structures. If the financing goal is to maximize the amount of funding for the business and to do so in a certain timeframe, then a one-stop provider like VION, can be a compelling option.
During economically challenging times, traditional bank lenders typically react by becoming conservative in their approach to lending. At the same time, businesses experience inconsistent sales results, slower inventory conversion cycles, and increased costs and expenses, all of which negatively impacts their bottom line and their ability to make interest payments on time. VION provides not only working capital to support the business, but they also provide the time necessary to execute their plans.
Alternative lending is a more accessible, faster, flexible and easier way to get the capital your business needs. VION focuses on the long-term plans of companies rather than month-to-month payments. Tailored alternative structures such as asset purchase facilities, secured financing arrangements, or profit sharing allow business owners to focus on running their company and not on financing. While alternative lending may carry a higher rate than traditional bank loans, the business owner must also consider the opportunity cost of not obtaining enough funding to expand or restructure and the impact of the repayment terms on working capital.