When I say "debt," do you think of risk, poor management, or perhaps wealth creation? I think I already know your answer. Because yes, in France, our attitude toward debt is usually negative. Yet, even in your personal life, it’s hard to become a homeowner without a loan. It’s time to change that perspective and finally understand the power of leverage to maximize your company's growth.

‍

The definition

As the name suggests, non-dilutive funding allows you to raise capital without diluting your company's equity among multiple investors. How? By leveraging various non-dilutive financing mechanisms such as grants, tax and social security relief, and debt (bank or bond-based).

‍

Bank debt and bonds

Bank debt vs. bond debt: what’s the difference?

Unlike bank debt, which, as the name implies, is taken out through banks, bond debt is issued by the company itself. In practical terms, with bonds, individuals or institutions directly subscribe to a debt coupon issued by the company. The rate is set in advance and is often higher than bank rates. There are several types of bonds:

Straight bonds — pure debt.
And convertible or exchangeable bonds that can evolve into equity.

‍

So, bank or bond debt: how do you choose?

The choice depends on your company's profile. At first glance, bank debt is cheaper and likely seems like the best option. But…

—> If your business doesn't fit the bank's criteria (for example, if your ratios are below their acceptance thresholds)

—> Or if, like me, you believe in the power of a mixed approach

… then bonds might be of great interest to you.

‍

Why combine bank debt and bonds?

There is one major hurdle with bank debt: your banker is not a venture capitalist. Your project might be great, innovative, and revolutionary, but banks don't like taking too much risk. Especially since regulations prevent them from allocating overly large financing packages.

In the private sector, none of that exists. The only thing that matters? Your business!

So here is my advice: find a Venture Loan provider to lend you part of the amount (and lead the project), then bring in a bank for the rest. As a wise person once said: balance and strength come from diversity!

‍

How do you choose your bank?

Depending on your industry, different banks have developed specific expertise and will be better equipped to support you. Here are a few examples (the list is not exhaustive):

Franchise: BRED Banque Populaire
Non-profits: Crédit Coopératif
Impact and CSR: La NEF
Green: La Banque Postale

At this point, I’ve hopefully convinced you of the benefits of non-dilutive financing. Naturally, your big question is:

‍

How and when should you use non-dilutive financing?

Before starting the process, my advice is to determine the amount of funding you are looking for for your company.

Next, ask yourself what will dilute your equity the least while maximizing leverage.

Finally, calculate the ratio you want between dilutive and non-dilutive funding.

‍

When should you start the non-dilutive financing process?

The only reason everyone doesn't borrow is that you first need to raise equity to create leverage.

I recommend starting the non-dilutive financing process at the same time as your fundraising. Why? It’s the best momentum to inform the non-dilutive lenders about your equity round and maximize your chances of success for both. Everything will generally fall into place at the same time.

But don't wait—even 3 or 4 months after your equity round is too long to start. You’ll often lose precious time, and for many, it becomes too late because the cash burn rate becomes a deterrent, and banks are no longer willing to lend to you at that stage.

‍

How do you go about the process?

I won't lie to you, it’s a long, fairly technical, and complex process. Of course, it’s not impossible to do it yourself! But like any entrepreneur, you might be short on time. That’s why at Super Capital we supports you through every step of the process.

‍

In short, as you can see, while debt is too often misunderstood, it is a major asset for your business. So, if you're interested, want to learn more, or are ready to raise debt directly, contact us. :)

‍