Cheap loans – the alternative to selling equity?
Madeleine Harrigan of Mercer Capital explains how cheap credit is driving companies to take loans rather than sell equity, and uses that to explain why the number of venture capital exits completed in the Q2, 2016, at 153, is the lowest since Q2 of 2010, with only 19 venture-backed IPOs in H1 2016 (compared with 52 IPOs in H1 2015).
Given the current interest rate environment, several unicorns, including Airbnb, Didi Chuxing and Uber, have capitalized on the cheap debt available in the market as an alternative to issuing more equity. The debt markets are proving unusually receptive to venture financing, for example giving Uber, a cash flow negative company with famously opaque financials, over $1.6 billion at 5.0%. Concerns over weaker credit standards in the banking industry have risen as competition for quality loans has driven down loan yields. Prolonged periods of low interest rates have compressed margins and…
Related Posts
Global Finance Entering “Twilight Zone” Says Macquarie
The Use Of Quasi-Debt Can Get You A Higher Price For Your Business
How To Get Part Of The £400m The UK Government Just Announced For Small Businesses
Your business broker / advisor is making a LOT more on your deal than you think.
The Death Of Venture Capital? The Good & Bad News
RBS squeezed struggling businesses to boost profits
