Capital structure is the combination of debt and equity used by a company to finance its overall operations and growth. Equity capital arises from ownership shares in a company and claims to its future cash flows and profits. Debt comes in the form of loans or bond issues, while equity may come in the form of common stock, preferred stock, or retained earnings. Short-term debt is also considered to be part of the capital structure.

Why do it?

A balanced capital structure helps a company manage its risk and return, influencing its stability and ability to attract investors. The right mix of debt and equity affects how a business finances its operations and expansion.

High debt can mean more risk but potentially higher returns, while more equity can mean less risk but also less reward. Balancing this helps a business stay stable and attractive to investors.

How can we help

Evaluate the debt and equity and financial analysis to determine the riskiness of a company's borrowing practices. We ensure that company is not heavily financed by debt since this is more aggressive capital structure and, therefore, poses a minimal risk to survival of business. Minimize cost of capital and carve out structure that is optimal for business with minimum impact to debt service payment and maintain equity level to primary focus on the firm's growth. By implementing these strategies, we can improve the capital structure of your business, ensuring financial stability and positioning the company for sustainable growth.

Bizleat's goal is to optimizing the mix of debt and equity to ensure financial stability, minimize the cost of capital, and maximize value for your business

Here is how we do it

• Evaluate Current Capital Structure by reviewing the current balance between debt and equity to understand the business’s leverage.
• Optimize Debt Financing considering refinancing existing debt at lower interest rates to reduce the cost of borrowing. Diversify Debt Sources using a mix of short-term and long-term debt to balance the benefits and risks associated with each.
• Increase Equity Financing by reinvesting profits back into the business to fund growth without taking on additional debt. Consider issuing new shares to raise capital while maintaining a healthy debt-to-equity ratio.
• Improve Cash Flow Management optimizing Working Capital. Improve receivables collection, manage inventory efficiently, and negotiate better payment terms with suppliers. Implement cost-cutting measures to enhance profitability and free up cash for debt repayment or reinvestment.
• Strengthen Financial Planning using financial forecasting and budgeting to plan for future capital needs and ensure funds are available when required. Conduct scenario analysis to understand how different financial strategies and external factors can impact the capital structure.
• Enhance Creditworthiness by improving the company’s credit rating to secure better financing terms and lower interest rates. Ensure compliance with debt covenants to avoid penalties and maintain good relationships with lenders.
• Leverage Tax Benefits by take advantage of tax-deductible interest on debt to lower the overall tax burden. Explore financial instruments that offer tax benefits.
• Strategic Asset Management evaluating selling of non-core assets to raise capital and reduce debt. Ensure that all assets are used efficiently to generate maximum returns.
• Maintain Financial Flexibility by maintaining a balance between debt and equity that allows the business to adapt to changing market conditions and seize opportunities. Keeping a financial cushion to handle unexpected expenses or downturns without compromising the capital structure.

Use Cases