At Wing Lake Capital, the focus has long been on working with troubled small businesses caught up in high interest merchant loans, and its The original Franklin Fund works with clients to “clean them up, restructure them,” said Baum, who called the company a “restructuring company that also writes a check.”
Yet as more companies “graduated” from the Franklin fund established by the company for businesses overwhelmed by high-interest debt, Baum said many expressed the need for more financing for the company. growth.
Baum said he sees two separate groups for the fledgling Capstone fund, which he said closed earlier this month on $ 50 million, a mix of debt and equity.
The first group is made up of companies that have weathered the crisis and are now in growth mode but still do not have the financial history that most banks will want.
In this regard, Baum noted that because companies are in a much more stable position, the cost of capital that Wing Lake can provide becomes significantly less expensive than in the initial stages, as companies try to get out of debt. payday loan.
Other companies, Baum said, will have an opportunity for growth, but in a space where payment could be delayed by weeks or months, such as a government contract. Banks will be reluctant to lend in such a case.
“So this capstone fund will allow us to really expand the services we provide to our clients and expand our customer base,” he said.
Baum acknowledged the relatively risky nature of these loans, but said the fund was “very selective” in selecting transactions and only choosing a small percentage. The fund is looking for good companies with a great operator who just didn’t have “the right capital structure,” he said.
“Having purchasing power cuts your expenses… If you have the money up front to prepay, the cost of your goods will obviously go down,” Baum said. “We make a plan for the business by saying that if you’re well capitalized, this is what you can really afford when it comes to debt service. And at this point, from our point of view, it doesn’t become a high risk business. “