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Case StudiesCash Flow
Cash flow is an accounting term that refers to the amounts of cash being received and spent by a business during a defined period of time. In the private equity and mezzanine debt world, EBITDA which is earnings before interest, taxes, depreciation and amortization, is often used as a proxy for cash flow.
It is the measure of the actual cash generated by a business rather than the accounting profit. Positive cash flow means more money is coming into the business than is leaving it. Negative cash flow is the converse. For asset intensive businesses, capital expenditures should be factored into EBITDA to determine cash flow.
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From Our Blogs
Acquisition financing should only require a personal guarantee under a very narrow set of circumstances. Often when buyers get desperate to raise acquisition financing, they […]
The eternal tension in acquisition structuring is balancing operational liquidity with leverage levels. Buyers often invade the operational debt capacity of a business to fund […]
Asset based lenders require collateral in the form of receivables or inventory. Despite borrowers having strong cash flow leverage metrics, they are confined to a […]
Earn-outs are used by buyers to plug the valuation gap. Sellers want more for their business and the buyer cannot afford to provide cash, so […]
The easiest way to differentiate between bridge loans and acquisition financing is by their maturity date. Bridge loans are very short term, usually 1 year […]
Mezzanine structures are built upon revenue visibility and cash flow stability. When a company knows for certain that revenue is showing up every year at […]
Lenders are conservative and use a number of protocols to test the business risk of their lending applicants. This is especially true for mezzanine debt […]
Financial Models contain tea leaves about your financing chances with mezzanine lenders. There are several things to be mindful of when constructing the model, so […]
Mezzanine lenders are expert sleuths at exposing fancy financial engineering in deals. It happens very quickly almost before the investment banker is finished with the […]
While profitability is great to have and certainly a key criterion, it alone does not lead to a successful mezzanine debt raise. Profitable companies can […]