Last Friday the Capital Entrepreneurs group joined with the Concord Chamber of Commerce to put on an interesting panel discussing financing options for growing companies in New Hampshire. The panel covered a range of options, from traditional bank loans to mezzanine financing and venture capital.
The overall advice from the panel was that you don't choose the kind of financing your company will use. Rather, your company's circumstances choose the financing that's appropriate. For example, if you are a stable, established company with assets, a standard banking relationship would be appropriate. It's the "least expensive" capital, meaning it comes with the fewest strings and you are merely obligated to repay the money plus interest and are not required to give up any equity or a percentage of sales.
On the other hand, if you have a startup with no track record and just lots of promise, your only option is VC funding (or angel investors, which the panel didn't really cover in any detail). The panel did note that VC's have a reputation as "vulture capitalists" because they generally insist on a level of control despite their minority stake in the company.
In the middle are so-called mezzanine financing options. These can include unsecured loans that may carry higher interest rates, could require royalty payments based on revenues, or in some cases even a share of equity. These options are most suitable for companies with some track record but who are not yet considered "bankable."
The bottom line is that there are many options available to fit the needs of your company. Good resources include colleagues who have been through similar scenarios or simply reaching out to any of the various entities described by the panel. Generally, if you haven't found the right choice, they'll try to point you in the right direction.
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