Knowledge base item

The right funding mix

Financing that fits the strategy

In order to grow a business, financing is needed. There are various types of financing options for increasing the balance sheet total. It is important that this financing mix is in line with the organization's business strategy. Depending on the objectives, a choice will have to be made for the most suitable financing mix. There are several possibilities.

Shareholders' equity

You can finance your business byraising equity capital. This form of financing involves paying capital into the company in exchange for an equity stake. This can be done with the help of various parties: informals, venture capitals or private equity parties. Which type of provider is best for your company's situation depends primarily on the life phase of the company and the desired investment amount.

Bank loan

There aredifferent types of bank financing. Bank financing can take the form of long-term loans, current account credit or financial leasing. The choice for a type of bank financing depends mainly on the type of investment.

Mezzanine

Mezzanine loans are generally loans with special conditions. The interest rate of the loan is generally higher than bank financing, because less security has been stipulated and the risk for the lender is higher. As a rule, we see this category a lot with companies that are already heavily financed with bank loans and that have reached their limit.

Asset based financing

This form of financing is also referred to as object financing.Asset-based financing involves financing based on a particular collateral as a counterweight. This can be done by leasing machinery or cars, but also by factoring in debtors, stocks, purchase orders or creditors (reversed financing).

These different forms can be used separately, but also in combination. The composition of this financing mix creates a colourful palette on the balance sheet.

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Marieke Klaassen
Marieke Klaassen van BeurdenSenior Corporate Finance Advisor

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