Corporate growth, in some ways, is an art form. How does the CEO balance growth with capital, human resources, and capital resources while constantly reacting to changes in the company’s industry and the day to day struggles of business? In smaller companies (under $10-20 million), most often the CEO plays all roles in trying to maintain the proper balance. But also most smaller company CEOs are critical to the marketing of the company’s products and services. Larger companies tend to delegate more. Experienced CFOs supplement a controller and treasury function and can be of extraordinary benefit to assisting the CEO in determining the right balance of corporate strengths and assets. Yet in the life of virtually every company comes a time when stagnation occurs. Revenues or profitability plateau. It’s like the body builder who plateaus at 200 pounds, and it appears that nothing can get him to 220. I’ve seen this happen with $2 million companies and with $500 million companies. But most of the time it is most seriously encountered with companies in the $5-50 million range. So what breaks the plateau? Most of time time it is an outside influence. It might be an accountant or a lawyer, …
In 2008 bank lending essentially stopped. It is safe to say that 2007 was the best lending environment in history. Tons of money available at incredibly low rates and without covenants. It was an LBO paradise. It seems that 2007 has returned. I’m working with a client on a new banking package. We’ve got a term sheet with good availability. Normal 80% LTV financing on capital equipment. Unlike 2007, the covenants are reasonable for both parties. But the interest rate? I still can’t believe it. Because of non-disclosure agreements, I can’t talk about the rates, but believe me, they are below anything you would expect. Even on 10 year money. As we learned not too long ago … get what you can while you can.
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