As we come back from holiday feasts and celebrations, it’s important for business owners to think about what the next twelve months will bring. In a volatile market environment, having the right capital structure is critical to navigating an uncertain road. Intrepid’s Capital Advisory Group is in constant dialogue with capital providers, with real-time insights enabling our clients to obtain funding for a wide variety of needs. A successful transaction requires thorough planning and foresight, so here are five things to consider for 2023:
- Double-digit interest rates are here to stay, but private credit markets remain open
- Sticky inflation is expected keep the Fed Funds Rate north of 4% through at least Q1 2024
- Deals are getting done, albeit at lower leverage and higher spreads
- A healthy balance sheet is a happy balance sheet
- If you think you need a cash cushion…get it! Don’t wait until it’s too late and options are limited
- Plan 12-24 months ahead: flexibility in a challenging economic environment is paramount
- Leave no stone unturned
- Attractive returns continue to entice capital allocators into credit funds, offering ever more creative solutions
- Lender mandates and investment strategies change constantly; a broad outreach typically yields the best outcome
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- Be ready to negotiate
- Terms are shifting against borrowers (tighter covenant packages, multi-year call protection, high upfront fees, etc.)
- Build detailed cash flow forecasts, know what you can afford, and stress test your assumptions
- Get your house in order
- Lenders are increasingly vigorous with respect to due diligence and underwriting criteria
- Prepare and clean up your financials in advance (and consider a Quality of Earnings report); time is of the essence
Running highly competitive processes to navigate current market conditions and find the perfect source of capital is becoming ever more critical. Intrepid brings a full arsenal of resources to help clients achieve their capital raising goals.