What Business Owners Should Know About Structured Finance Advisory

Most founders are familiar with basic financing concepts: loans from banks, equity from investors. But between traditional debt and straightforward equity lies a spectrum of capital solutions that many business owners never encounter until a specific transaction demands them.

Structured finance advisory helps founders and their teams design financing that fits situations where conventional options fall short. Understanding what structured finance involves and when it applies prepares business owners for conversations that may arise during growth, acquisitions, or recapitalizations.

Beyond Basic Debt and Equity

Standard debt and equity structures work well for many situations. A business with stable cash flow secures a term loan. A founder raising growth capital sells a minority stake. These transactions follow familiar patterns with well-understood terms.

But not every situation fits neatly into these categories. A founder pursuing an acquisition may need more capital than senior lenders will provide, but wants to minimize equity dilution. A business owner seeking partial liquidity may want to retain upside while accessing cash today. A company with strong assets but variable cash flow may need financing that accounts for both characteristics.

Common Structured Finance Instruments

Structured finance advisory involves familiarity with a range of instruments, each suited to particular circumstances:

Mezzanine Financing

Mezzanine debt sits between senior debt and equity in the capital structure. It typically carries higher interest rates than senior loans and often includes equity participation through warrants or conversion features. Founders use mezzanine to bridge funding gaps without giving up significant ownership. Lenders accept higher risk in exchange for enhanced returns.

Preferred Equity

Preferred equity provides investors with priority claims on distributions or liquidation proceeds ahead of common shareholders. It may include fixed dividend rates, participation rights, or conversion options. For founders, preferred equity can bring in capital while preserving common equity upside. For investors, it provides downside protection relative to common shares.

Unitranche Facilities

Unitranche debt combines senior and subordinated debt into a single facility with one set of documents and one blended interest rate. This structure simplifies execution and can speed transaction timelines. It works well for acquisitions or recapitalizations where founders want streamlined financing without coordinating multiple lender groups.

Convertible Notes

Convertible notes start as debt but convert to equity upon specified triggers—often a future financing round or liquidity event. They allow founders to defer valuation discussions while accessing capital. Investors receive downside protection as creditors with upside participation if conversion occurs.

Asset-Backed Structures

Some businesses have valuable assets—receivables, equipment, real estate, or contractual cash flows—that can support financing even when traditional lending is constrained. Asset-backed structures isolate specific collateral to secure borrowing, sometimes through special-purpose vehicles that separate the assets from general corporate risk.

When Structured Solutions Apply

Structured finance advisory becomes relevant in several common scenarios:

●        Acquisitions requiring layered capital: Buyers often combine senior debt, mezzanine, and equity to fund transactions. Structuring this stack requires balancing cost, flexibility, and founder objectives.

●        Recapitalizations with partial liquidity: Founders seeking to take chips off the table while retaining ownership may use structures that provide cash today while preserving upside participation.

●        Growth financing beyond debt capacity: Businesses that have maximized senior borrowing but need additional capital may turn to subordinated or hybrid instruments.

●        Transactions with uncertain valuations: Convertible structures allow parties to proceed when agreeing on valuation proves difficult, deferring the question to a future event.

●        Situations requiring speed or simplicity: Unitranche and other consolidated structures reduce complexity when timeline pressures exist.

The Role of Advisory Support

Designing structured financing requires understanding how different instruments interact, how terms affect founder economics, and how structures impact future flexibility. Structured finance advisory guides through this process.

Advisors help founders evaluate which instruments fit their situation, model the economic implications of different structures, negotiate terms with capital providers, and coordinate across multiple financing sources when transactions involve layered debt equity combinations.

Conclusion

Structured finance advisory helps founders move beyond basic debt or equity choices to design capital solutions that fit specific circumstances. Whether funding an acquisition, executing a recapitalization, or bridging a gap between available debt and required capital, structured instruments provide flexibility that conventional financing may lack.

Bainbridge is a top advisor for middle-market companies seeking expert structured finance advisory, helping founders navigate debt and equity decisions with the insight and execution support needed to structure transactions that align with long-term objectives.

This article is for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities. Past performance is not indicative of future results. Bainbridge Investment Bank is a trade name of Bainbridge Capital Securities, Inc., a registered broker-dealer and member FINRA/SIPC.