Optimal Pairing™ = Optimal Results

“Optimal Pairing™ = Optimal Results” is our trademarked tagline. So, what’s that all about?

Over the years, I have repeatedly noticed something odd when analyzing a potential client’s liabilities. Their primary working capital lender is not one who I would have expected it to be. By that I mean they don’t seem compatible with each other. I would usually associate that lender’s new business appetite with a noticeably different type of borrower—one that’s bigger or smaller, stable or struggling, in an unusual industry, etc.

Ok, but why is that important? It’s important because when the borrower’s circumstances change, the lender may not be prepared to respond in a favorable manner. Say, for instance, the borrower has an opportunity to expand its market by acquiring another company or offering a new product or service. If the lender is not compatible, it may have a knee-jerk negative reaction to increasing its facility. Furthermore, if the borrower begins to struggle and doesn’t show immediate improvement, the lender may lose patience. Either of these scenarios can cause huge reductions in the borrower’s value or, worse yet, cause it to cease operations.

So why did that lender and that borrower choose to do business with each other? The borrower may have loved the pricing or the structure. Meanwhile, the lender may have been under pressure to rapidly expand its assets and, therefore, overlooked signs that they were deviating from their proven strategies.

At Capital Access Partners, our goal is always to pair up lenders and borrowers that are compatible. Yes, sometimes this means the borrower doesn’t base its decision solely on pricing or structure. It is willing to modestly alter its objectives to ensure comfort with a new lender who is equipped to understand and responsibly respond to changes in the borrower’s circumstances. For one thing is certain – the borrower’s circumstances will change.

At Capital Access Partners, we won’t change. Our goal is to always achieve maximum compatibility for our clients since we truly believe Optimal Pairing™ = Optimal Results.

What are you going to believe? Does it matter?

As to why the recession may be upon us, here are some popular explanations:

• They occur with reasonably frequency and it’s now a bit overdue.

• Most commodities are valued in U.S. dollars, and its strength is impeding international trade.

• Russia’s invasion of Ukraine has exposed global institutional weaknesses.

• The Fed has overreacted and done it (again) far too late.

• The Covid impact has disrupted normal supply and demand patterns causing businesses to focus on reacting as opposed to following well thought-out game plans.

• Our congress and executive branch continue to legislate and regulate with a short-term view that tends to deemphasize long-term value creation.

• Ultra-low global interest rates created a vast oversupply of capital anxious to invest in a manner inconsistent with reasonably sustainable results.

Go ahead and pick one or more of the above. Let me know if I have missed an explanation or two. Does the existence of these explanations matter? My answer is regrettably pessimistic. It doesn’t matter because economic impediments happen all the time and are sure to continue.

Therefore, let’s not worry about looking in the rear-view mirror. There is absolutely no profit in that exercise. Instead, let’s focus on how we conduct ourselves now that will leave our businesses in a stronger position when growth opportunities become more apparent. So, I suggest we crank up our vision strengths.

Capital Access Partners exists to help companies arrange their working capital needs in such a manner that supports their short- and long-term planning. And we firmly believe that businesses seeking capital of any kind should pay maximum attention to compatibility with their capital providers. Optimal Pairing™ = Optimal Results.

Let's All Take A Deep Breath

I’ll make this brief.

Interest rates are going up for corporate borrowers and will test the viability of many. Although you know I’ve been impressed with how corporate America has withstood all the challenges of recent years, it has not yet faced a sustained period of rising interest rates. This will be its biggest test yet.

We should at least prepare to see interest coverage violations and lots of negotiating to resolve them. Either that or the borrower begins to search for a more flexible lender. But borrower beware because a flexible lender may not be compatible, and that’s important.

At Capital Access Partners, we firmly believe that businesses seeking capital of any kind should pay maximum attention to compatibility with their capital providers. Optimal Pairing™ = Optimal Results.