Mezzanine financing

Vested for Growth provides three "types" of financing. However these represent only typical examples. The key feature of VFG investments is that they are truly customized to meet the unique needs of the business.

Subordinated debt

This is a straightforward loan, subordinated to the existing senior debt. This structure is appropriate when there is collateral available to the investor, in addition to a strong management team and solid growth plan. These loans typically supplement bank debt, but could also be the only debt in the deal. The advantage is that it does not dilute ownership, and is relatively inexpensive.

With higher-risk deals, sub debt can be combined with warrants (a right to purchase stock in the future at an agreed-upon price) in order to boost the return to compensate for the given risk.

See an example, or, contact us to learn more.

Subordinated debt + royalty

This is the most typical deal structure at VFG, and represents our true innovation in the market. This deal structure is appropriate when there is little or no collateral available to the investor, and yet there is a strong management team with a solid growth plan.

Royalty financing typically consists of the subordinated debt instrument above, but includes a revenue-based "kicker" to compensate for the uncollateralized nature of the deal. When a royalty investor finances a company, instead of taking a piece of the ownership structure they share in a piece of the revenue stream for a fixed amount of time, typically five years with an option for pre-payment after year three.

Not only does this not dilute ownership, it has the advantage of aligning payments with the company's ability to pay. As the company grows, the payment grows in proportion. If the company has a hard month, or hard quarter, the payment shrinks to accommodate. The better the company does, the better the investor does. If the company doesn't do as well, VFG doesn't do as well. It is a flexible instrument that provides performance-based returns, aligns the interests of the capital with the interests of the business owner, and prevents the company from having to sell itself to satisfy outside shareholders.

Expected returns are more than with  subordinated debt, but less than with equity.

See an example, or, contact us to learn more.

Pure royalty

This mechanism involves repayment only through the royalty "kicker" mentioned above. However it is different in that a required investment multiple is determined at the time of investment, and then a certain percentage of revenue is paid monthly until the multiple is achieved.

For example, if under this structure VFG invested $300,000 and agreed to a 2X multiple, the company would then pay a percentage of monthly revenue until total payments reached $600,000. If the company grows quickly, the returns are achieved more quickly. If the business takes longer to achieve its goals, the investment is returned over a longer period of time.

This structure is particularly useful for companies that have solid growth plans, but are unsure of exactly when the expected revenue will materialize. By basing the repayments purely on the company's performance, the owner avoids a fixed monthly obligation and instead pays only what is appropriate for that period.