Frequently asked questions
The nature and impact of debt; the role of a debt adviser; and what to expect working with us.
Capital
Why is debt important?
The right type of debt, raised at the right time and on the right terms, can be the difference between seizing an opportunity and missing it. Used well, debt lets a business grow, invest or change ownership at a lower cost of capital and lower dilution of shareholders' stakes in the business.
What is the difference between debt and equity?
Debt typically has lower cost of capital, but does come with certain strict obligations: a fixed repayment regime, regularly-tested covenants, and restrictions on business dealings. Failing to meet the conditions can cause major issues for the borrower. Equity is typically a more patient, permanent form of capital. In exchange for having no fixed payments or repayment dates, shareholders typically have voting rights that influence the direction of the business, and a proportional stake in the financial success of the business. If the business were to fail, debt providers normally get repaid first from any residual value, creating the risk that shareholders get no value at all. Most businesses use a mix of the two, and getting that mix right is a critical strategic decision.
What is hybrid capital?
Hybrid capital is a type of instrument that has features of both debt and equity. For example, it may have an agreed repayment date, as well as the ability to share in the borrower's growth. Hybrid capital can be useful to help structure for unique situations, reduce pressure on debt capacity, while minimising the need to dilute shareholders, in return for a cost of capital higher than debt.
What are the benefits of using debt?
Debt has a lower cost of capital than equity; it keeps ownership and future upside with the shareholders; and it is a useful way to add financial discipline to a business. A well-structured debt facility can also scale as the business grows.
Why is debt risky?
Debt principal and interest must normally be paid in cash, regardless of how the business performs. Too much debt, using the wrong structure, or failing to renegotiate terms in a timely manner, can strain cash flow and severely limit flexibility. Covenants, maturities and interest-rate movements all need managing. The risk is rarely the use of debt; rather, it is debt that does not fit the strategy or operations of the business.
Debt advice
When thinking about debt raising on your own, or with the benefit of an experienced adviser.
When should I use a debt adviser?
A debt adviser adds the most value when your financing situation is complex, your internal resources are stretched, or your lender network is limited. The earlier you involve an adviser, the more options you keep open. Even a short early conversation can be useful.
What makes a good debt adviser?
A good debt adviser will bring relevant transaction experience, a strong understanding of the options available to your situation, and access to the right sources of capital. They will give appropriate attention to your deal, independent insight to help you make decisions, and use their judgement to structure for the long term, rather than just the next deal.
I have a CFO; do I need a debt adviser?
Your CFO has a critical role in a debt raise, but their primary role has a much wider scope. A debt raise is a full-time project that may take several months. A debt adviser runs it end-to-end, so your finance team keeps its focus on the business. A competitive process also reaches more lenders, in parallel, than a CFO can usually manage alongside their day job.
I used to work in finance; do I need a debt adviser?
Your experience is a real advantage, and a good adviser will use it. But the lending market moves constantly: appetite, pricing and the active lender list all change. An adviser in the market every day brings a current, full view of who has the mandate to support your objectives and on what terms.
I already have bank relationships; do I need a debt adviser?
Good relationships matter, and a good debt adviser will always leverage this in your favour. But a single lender rarely gives you the best terms or a fallback option. A confidential, competitive process across lenders is what creates genuine tension on price and structure, and protects your relationship by keeping it commercial.
Working with Long Lane
When thinking about working with us.
What borrower sizes and deal parameters can Long Lane advise on?
Long Lane typically advises companies from sub-€5m EBITDA (lower mid-market, debt raises typically up to €10m-€40m) to €50m EBITDA (mid-market, raises up to €250m-€300m), as well as standalone projects. Long Lane has previously advised on much smaller and much larger transactions; so if you fall outside these parameters, please contact us to further discuss.
What countries can Long Lane advise in?
Long Lane is based in the Netherlands, with a primary focus on the Netherlands, the UK, Western Europe and Northern Europe. Other regions can also be assisted on a case-by-case basis; you are welcome to describe your situation and we can quickly assess our ability to provide services in your country.
What situations can Long Lane advise in?
Long Lane can advise on most corporate financing situations. In addition, Long Lane has experience in financing projects, real estate, special situations, and startups.
How does Long Lane differ from other advisory teams?
Long Lane brings a combination of broad international track record and a lean, hands-on operating style. Large institutions bring brand recognition and additional staff, but also higher structural costs and the risk of conflicts of interest across departments and teams. At Long Lane, there are no competing mandates. We personally lead and execute on every engagement, drawing on extensive experience that is applied towards the client's unique situation.
Does Long Lane work with sponsors, founders or management teams?
We can work with all of them. For new acquisitions, Long Lane is typically engaged by the sponsor or its deal team. For refinancings, covenant resets or add-on funding, Long Lane works closely with the portfolio company's CEO and CFO. Long Lane also partners with M&A advisers, lawyers and accountants when financing forms a critical part of a broader mandate, with clear scope accountability.
How long does a debt raise take, and what will you need from us?
The timeline of a debt raise is influenced by many factors, including (but not limited to) the financing purpose, the state of the business or project, the quality of information, and availability of management. We can give you a more detailed guidance on timing and information requirements following the initial discussion.