six reasons why ceos should know about bdcs
TRANSCRIPT
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Few investors or CEOs have known what BDCsare and why they are advantageous to growing
businesses, but that situation is changing.
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Here, then, are six reasons why BDCs are thrivingand will continue to grow as a source of capitalfor smaller, middle-market companies and why
CEOs should understand how valuable they are asa source of financing.
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Evaluation as
a Growing Concern,
Not Just a Credit Risk.
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A BDC looks at the entire business and its prospects forgrowth rather than just its credit history.
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A BDC looks at the entire business and its prospects forgrowth rather than just its credit history.
Banks under tighter scrutiny as a result of recent law andregulation now have less freedom in accepting risk.
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A BDC looks at the entire business and its prospects forgrowth rather than just its credit history.
Banks under tighter scrutiny as a result of recent law andregulation now have less freedom in accepting risk.
A BDC working with a bank can structure deals thatotherwise might not be acceptable.
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Focus on Relationships,
Not Just Transactions.
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A BDC typically takes on an investment that is higher riskthan most bank portfolios can tolerate.
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A BDC typically takes on an investment that is higher riskthan most bank portfolios can tolerate.
This means the BDC needs to truly understand a company’sbusiness and to form an ongoing relationship with it, so itcan help the company to expand.
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A BDC typically takes on an investment that is higher riskthan most bank portfolios can tolerate.
This means the BDC needs to truly understand a company’sbusiness and to form an ongoing relationship with it, so itcan help the company to expand.
BDCs grow by doing their homework and maintaininginvestment discipline.
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Certainty of Closing
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Once a BDC approves a company, there is a high certaintyof closing a deal without wasting time.
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Once a BDC approves a company, there is a high certaintyof closing a deal without wasting time.
Often those who arrange a deal are on the investmentcommittee approving it, unlike other financial institutions,where there are multiple levels of approval.
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Shrinking Capital Market
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There are fewer banks with lower market shares and theircapital structures have become more conservative.
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There are fewer banks with lower market shares and theircapital structures have become more conservative.
This contraction has narrowed the capital window for manysmaller, middle-market companies, even stable andconservative ones.
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Customized Financial
Engineering
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BDCs take on more financial engineering than just termloans.
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BDCs take on more financial engineering than just termloans.
BDCs with extensive experience in the lower, middle marketcreate customized, financing solutions for clients.
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BDCs take on more financial engineering than just termloans.
BDCs with extensive experience in the lower, middle marketcreate customized, financing solutions for clients.
As solutions-oriented lenders, they partner with businessowners, equity sponsors, fundless sponsors, family-ownedbusinesses and management teams to craft capitalstructures that enable them to pursue their business plans.
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Experienced Professionals
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BDCs are staffed by professionals with deep experience,both in the private-equity side and the mezzanine andsenior lending side of businesses.
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BDCs are staffed by professionals with deep experience,both in the private-equity side and the mezzanine andsenior lending side of businesses.
They have closely examined thousands of companies andcan understand more extensively and quickly how tocustomize a financing solution for a client.
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BDCs are beginning to emerge as a significantforce in lending to smaller, middle-market
businesses, but there still is limited understandingof what they are and how they work.
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CEOs who haven’t encountered them will findthem not only to be alternative sources of
capital, but easier to work with than traditionallenders, and conclude that they should be a
regular part of their financing tools.
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