Financing Structure Tips – Over the years there have been numerous structures that have evolved to fit various stages and situations involving corporations.  While there are a relatively small number of financial structures that investors can use when funding a company, but there are an infinite number of variations.  The basic financing structures are debt and equity.

Although a pure equity based structure alleviates the problems and worry management has about making principal and interest payments, management is giving up a piece of the equity in its company in exchange for the privilege of not having to make those payments.

Management of Reverse Merger Funding has experience in working with many different structures. If your existing Company is looking for funding consider Submitting A Funding Request. We can work with management of your company in structuring and funding the purchase of a company and obtain a public listing.   We can help companies that are looking for growth capital for expansion, acquisition funding, or funding to pay down outstanding loans to increase net income.

While very few companies have no debt, there is a lot to be said for not having to make large principal and interest payments each month. Private equity firms typically structure their deals as debt with an equity kicker. This means that the company has to pay back all the funding that was provided and the private equity firm keeps a percentage of the equity (in the form of common stock or preferred stock) in the company.

A good financing structure tip when dealing with this type of situation is of course first to carefully weigh all the options. Examine how much the company can really pay monthly in a worse case scenario, and what the defaults provisions provide if the company defaults. Make sure you go over the numbers carefully with your CFO or accountant and call in competent legal counsel to advise you regarding the default provisions, which in some cases can cause you to lose control of your company or send the company into bankruptcy.  Then have the board vote to determine if that financing structure works best for the company or if the company should pass.