97% of New Zealand businesses are small to medium in size and employ 20 workers or less. Helping such businesses reach their full potential is important to Armillary, as doing so boosts local economies and employment rates. By helping our Kiwi businesses grow, we help their owners, stakeholders, and ultimately investors succeed. Armillary partners with businesses across New Zealand to help them during every stage of their evolution and growth. It all comes down to helping our businesses find the right level and mix of capital.
Capital helps to address solvency issues of a business. These are issues regarding a business’ ability to meet its financial obligations and long-term debts. Capital is also an essential resource needed to drive growth. Armillary assists in the raising of capital for businesses, whether that be in the form of debt or equity or a mix of both. Most importantly, we ensure that the processes employed to do so, and the mix of capital are fair on all parties involved.
But what is the right mix of capital?
Finding the right level and mix of capital is an intricate process. A good starting point is to understand the business’ strategy, uniqueness and vision; this provides context for important decisions regarding finance and growth. The people that make up the business should also be understood well. These include not just owners, governors and managers, but employees and other stakeholders. It is important to know what the long-term objectives are for all involved, as these will affect the type of capital required and what it will be used for.
Understanding the financials of the business is the next step. Financials primarily include historic financial performance, current budgets, projected financial performance, and the business’ make-up of assets and liabilities. The environment in which the business operates is also beneficial to know. This includes information on a business’ position in the value chain, its position in the industry sector and their geographical reach. Such information helps determine the risk of the sector which can impact prices and ability to raise capital.
After analysing the business holistically, a capital plan can be drawn up. This is essential in determining the “right mix” of capital required; permanent capital, debt or a hybrid of both. Ensuring that a business has the right kind of capital at the right time is imperative to its growth and success.
Equity capital is permanent capital. Equity capital usually provides investors with a percentage of the business’ ownership in exchange for their investment. A general characteristic of this is that no regular payments are required. Furthermore, the risk is shared due to the now diluted ownership structure.
On the other hand, a business that seeks capital from a debt provider is required to pay back the principle loan and interest. The debt provider would not have a claim to equity in the business. This means that the business owner’s ownership stays with them.
Having a clear capital plan as part of an overall strategy is important. Too often we see businesses raising capital in one form without considering to future impact of this for future capital requirements.
At Armillary we take pleasure in playing such a vital role in enabling businesses at every stage succeed and reach their full potential.