Converting Equity into Debt
When private equity firms look to reduce exposure, timing and strategy are everything. For our client, a private equity firm invested in a leader in CNC machining and large-part assembly, the challenge was clear: replace equity with debt without disrupting operations.
The Challenge
Our private equity client wanted to make their investment liquid. However, waiting too long meant machinery and equipment (M&E) values had already started to decline. This is a common scenario in capital-intensive industries where market shifts can quickly impact asset values.
The Solution
Loeb stepped in with a tailored asset-based lending solution. By leveraging the substantial M&E assets, we structured a financing package that converted equity into debt efficiently. The result? $3.5MM in funding.
Our dual role as lender, appraiser, and auctioneer provided a unique advantage. We kept our client informed on industry trends and asset valuations, ensuring a smooth and strategic refinancing process.
Key Results
- Funding Secured: $3.5MM
- Outcome: Equity replaced with debt, liquidity achieved
Lessons Learned
- Knowing When to Convert
Timing is critical. Delaying conversion can lead to lower valuations and reduced borrowing power. Regular appraisals and market insights help you act before values drop.
- Leveraging M&E for Debt or Refinancing
Your machinery and equipment aren’t just operational assets, they’re financial tools. Equipment financing, leasebacks, and asset-based lending can unlock capital for growth or restructuring.
- Carving Out Collateral Between Lenders
When multiple lenders are involved, structuring collateral correctly is key. Our expertise in carving out M&E outside a bank’s borrowing base allowed our client to maximize liquidity without disrupting existing credit lines.
Client Testimonial
“Loeb made the refinancing process simple and easy. We worked side-by-side to ensure a seamless closing and funding and look forward to having them as a partner moving forward.”
Why This Matters for Your Business
If you’re considering refinancing or need liquidity, asset-based lending and equipment financing can be game-changers. Whether it’s equipment term loans, leasebacks, or distressed lending, the right strategy can help you stay competitive.
Contact us to learn more about leveraging your equipment for financing.
FAQs
Q1: What is asset-based lending? A: It’s a financing method where loans are secured by company assets like machinery and equipment.
Q2: How does equipment financing differ from leasing? A: Financing provides ownership after repayment, while leasing offers temporary use.
Q3: Can I refinance existing equity with equipment loans? A: Yes, equipment term loans and leasebacks are common strategies for refinancing.
Q4: What industries benefit most from asset-based lending? A: Manufacturing, metalworking, food processing, and other equipment-heavy sectors.
Q5: How quickly can I secure funding? A: With proper documentation, approvals can happen in days, not weeks.
