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Disrupting the Debt Capital Market
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Wholesale Financing with the 4X Loan
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After a brief pause due to the global pandemic, the 4X Loan program is back online and today it is better than ever! Now with any initial deposit or $10M USD or more you may be able to hold your deposit in your own existing bank account. For smaller loans with deposits under $10M initial funds will be escrowed during the draw down of the loan and returned to the borrower, having never left escrow, 30 days after the last draw. Loans are either escrowed with HSBC London or for US borrowers with a domestic Commercial Bank/Escrow Company.
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Wholesale Debt Financing |
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Unlike traditional banks, conventional lenders or venture capitalists, our unique privately owned and operated wealth lending program provides a brilliant strategy for capitalizing any business.
Forget what you know about typical banking or conventional loans, this is definitely not that. |
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Learn more about a wholesale lending program that has been intentionally designed to fully mitigate and remove all risk to the borrower and their investors. By working with respected global partners and providing a 100% guarantee on the borrower's deposit. This lender has invested significant expense to design a structure that supports itself. They have focused on removing all risk from the transaction and this unconventional approach delivers the security and the comfort required by borrowers and investors alike.
The deposit is not encumbered or depleted or used as collateral for the loan. It never leaves escrow, it always belongs to the borrower/investor and it is returned to the originating account after the loan has been fully deployed. There is no better way to capitalize your company! |
Searching for the Right Mix of Debt and Equity
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When a company decides to enter the market to do an open capital raise, they focus on gaining access to the investment they need. However, we know that the cost of raising equity reaches far into the future and sometimes presents painful consequences down the road.
Entrepreneurs try to protect themselves as best they can; negotiating deals and terms they can live with, as they strive to attract investors and minimize their own dilution. With stock dilution, sometimes referred to as equity dilution, existing shareholders experience a decrease in their ownership percentage of the company as a result of the company issuing new equity. The equity injected increases the total shares outstanding which has a dilutive effect on the ownership percentage of existing shareholders. Raising debt financing can be a good alternative but expensive in the short term when dealing with hard money lender types, but in the long run it can still yield better results than an equity raise. There is a big problem with raising debt nancing however, and that is having the assets to secure a loan big enough to reach the capital threshold necessary to achieve the plan. The ideal solution would be to find a non-recourse loan where you don’t need the collateral upfront to secure the loan. With that type of loan, you could structure your raise with the right mix of debt and equity. The lender could structure a non-recourse loan with a General Security Agreement (GSA) against the asset being developed and as the loan is spent into the project, the project itself increases in value. How the GSA is structured secures the loan, whether the loan is spent into physical assets or developing intellectual property. |
Obviously using pure IP would be a very unconventional approach and a high risk loan for the lender. It would mean if the loan defaulted the lender would foreclose on the project and in the case of developing IP, it is definitely more difficult to monetize than a physical asset would be.
Here is a capital strategy scenario: For this example, we will assume you and a wholesale debt lender and you are able to leverage your capital to generate the credit facility you need. The company is raising $35m and the proposed mix is $15 million in equity and $20 million in wholesale debt financing. What terms would you need on the debt to make this all work? What if I told you that the wholesale debt terms were interest only for 48 months at the wholesale rate of Libor +2; that it was a non-recourse loan with no early payment penalties and a tranche schedule that would deploy the money over 9 to 12 months? Recapping: on a $35m capital target, the raise is $15m in equity. The company could take $5m from the equity raise and leverage it with our wholesale debt lender to generate a $20m credit facility. They would still have $10m in equity remaining and would draw down on the $25m in the credit facility over the next ten months. It is rare that the business would need access to the full $35m up front, so ten monthly draws would not typically be an issue. In this scenario they raise $35m and give up equity on $15m. Raising less than half of the capital needed in equity will go a long way to preserving their equity and minimizing dilution and pay huge dividends to existing shareholders over the long run. |