Alternative debt instruments may enhance investment returns through increased financial leverage—are they right for you?
What pops into your mind when you hear the word “banks?” Most people think of either conservative lenders, reluctant to provide the cash one requires to grow, or the “banksters”, so aggressive in their investment principles that they lose life savings through mortgaged-backed securities.
The truth is, lenders who serve the energy services industry are rational investors who base their decisions off of risk and return tradeoff considerations.
Lenders will continue to play a significant role, as energy services companies reposition themselves to not only survive the remainder of the downturn, but to thrive. To do so, it is imperative to understand how lenders decide creditworthiness. Moreover, companies must weigh the advantages and disadvantages of different commercial debt financing options, including the associated tax implications. Effectively utilizing alternative lending vehicles, like asset-based lending and sub-debt, may provide increased financial leverage to help your organization grow.
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KPMG’s Deal Advisory team can counsel you through the multiple options available to maintain or grow your business in a cyclical industry. Our forward-looking specialists have business acumen, deep sector knowledge and technical know-how to help you stay ahead of the issues and make the best decisions to meet your goals.