Financing growing businesses
Young, fast growing IT businesses often have to invest significantly in infrastructure ahead of generating any revenues. Such businesses find it hard to borrow sufficient money to finance their expansion, moreover the owners are often unable to raise the equity capital themselves and are unwilling to see their ownership interest diluted by bringing in outside investors.
A good example is a business providing telecom and IT services to business customers. The company started life providing such services to customers located on business parks, doubling monthly turnover every month in the first two years of its existence. The business' owners then saw the opportunity to expand by providing data hosting services to their customers through the establishment of a series of data hosting centres.
Each centre needed substantial investment in the building and IT infrastructure required to support the operation. While commercial mortgages could be secured against the properties, a significant proportion of each investment would have had to be financed through an equity fund raising.
Bluestone used the data centre and the associated prospective revenue streams as security for a funding package for the client that helped reduce the equity required from outside investors. This package also enabled the client to roll out their expansion far faster than would have been the case if their growth had to be funded out of retained profits.
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