Background
Strategic Funding Advisor
Firm Expertise
Practical Experience
Legendary Customer Service
Closed Deals
Testimonials
Business Funding
Acquisition Funding
Mezzanine Funding
Advisory
Mezzanine Funding
Mezzanine Expertise
Mezzanine Tools
Acquisition Funding
Acquisition Funding Expertise
Acquisition Funding Tools
Case Studies
EBITDA may drive valuations and leverage, but cash flow pays the bills. Mezzanine debt lenders know this and look for both when selecting deals. EBITDA has value to the extent it converts into cash flow, yet too many buyers miss the importance of this fact.
All too often, EBITDA becomes trapped in working capital, especially with fast acquiring companies. To have a successful mezzanine debt experience, companies need both cash flow planning and EBITDA growth. They work hand in hard.
Mezzanine Debt and Cash Flow Discipline
Daily and weekly cash flow planning allow companies to align cash flow with EBITDA ensuring liquidity is sound. Annual financial models can create an appearance of cash flow strength, while monthly and weekly model views tell a different story.
The timing of big working capital outflows and inflows, imperceptible over the long term, can create point-in-time financial stress. The more macro the financial view presented, the less likely a mezzanine debt lender is to find comfort.
Detailed financial modelling that tracks daily and weekly cash flow movements are the plumbing and pipes of a healthy financial infrastructure. These cash flow planning tools enable micro level visibility and point in time variances that all financial officers need to steer the ship.
Most mezzanine debt lenders require strong cash flow planning as well as working capital availability, to ensure the company’s liquidity is balanced.
Acquisitions increase the scale of a company and require more working capital. Even though an excel model may show accretive cash flow growth from the acquisition, the cash inflow from the new acquisition may be lumpy and unpredictable.
Overlaying daily and weekly historical cash flow factors to the company’s liquidity management reduces this integration risk. Mezzanine debt lenders understand the vagaries of EBITDA and cash flow performance. They bring knowledge and real-world experience to their borrowers to help them navigate these hard to manage variables.
