Runway Roulette: How Cash Runway Impacts Debt Capital Terms!

Is your business ready to sprint, jog, or go the distance? Discover how your cash runway can make or break your debt capital journey in the financial race.

??Surviving on the Edge (3-Month Cash Runway)?

Who is it for?

Ideal for businesses with razor-thin finances and an urgent need for funding.

Loan prospects?

Navigating Choppy Waters: Securing debt financing in this scenario is a tough challenge, with lenders often hesitating due to the ultra-short cash runway.

Equity options?

Equity Becomes the Lifeline: Raising equity takes center stage, and lenders may demand a focus on equity fundraising to stabilise the financial footing before considering debt options.

What strategy works the best here?

In the pressure cooker of a 3-month cash runway, urgency defines the game plan. Equity fundraising becomes the primary avenue for capital injection, with lenders insisting on strengthening the company's financial health through this route before discussing debt options.?

Pro-tip: A proactive approach to attracting investors, pitching your business's growth potential, and demonstrating your commitment is paramount.

?Breathing Room (6-Month Cash Runway)

Who is it for?

Suited for companies with somewhat more financial leeway but still needing quick access to capital.

Loan prospects?

Clearing Some Clouds: Obtaining a loan becomes more attainable, though constraints persist. Lenders might entertain short-term loan options to bridge the gap between cash requirements and the runway.

Equity options?

Equity Still in Play: While equity fundraising remains on the table, it's less pressing than in a 3-month scenario.

What strategy works the best here?

With a 6-month cash runway, businesses have some room to manoeuver.?

While equity fundraising remains an option, it may not be as urgent as in a 3-month scenario. But, having a well-defined repayment plan is essential when seeking loans. Lenders may be willing to provide short-term loans as a bridge solution between cash needs and the runway.

??Long-Term Stability (12-Month Cash Runway)

Who is it for?

Suitable for companies in a more favourable financial position, enabling long-term planning.

Loan prospects?

Extending the Loan Horizon: Lenders are more amenable to considering longer-term loans in this scenario. The company gains flexibility to explore various debt options without immediate financial pressure.

Equity options?

Equity Still an Option: Although equity fundraising remains a possibility, it's less of an imperative.

What strategy works the best here?

A 12-month cash runway creates a conducive environment for debt financing. Companies can think about longer-term loans with more favourable terms and conditions.?

This extended financial cushion also provides flexibility to explore diverse debt solutions without the urgency typically associated with shorter cash runways.

Choose the runway that suits your business best and plan your finances smartly with a financing advisor to align with your objectives and financial capabilities.

Book a free call with a Recur Club Financing Expert here: https://bit.ly/3ZMK1J0