Debt: Debt lenders prefer to finance the acquisition of business assets and/or real estate. These physical assets have defined resale values and provide lenders with a secondary form of repayment if a customer goes out of business.<br />Debt lenders also look favorably upon growth capital and day-to-day working capital because these needs often indicate a company’s intent to expand, which might improve revenue and profits. While positive, lenders consider these types of loans slightly more risky than the hard assets mentioned above.
Debt lenders consider past due or delinquent debts indications of cash flow problems, and look at them in a very negative light.
Royalty: Royalty investors are typically interested in companies on the verge of moderate to significant revenue growth, so prefer companies looking for financing to purchase assets, access growth capital, or facilitate a merger/acquisition. Requests that are unlikely to support revenue growth, especially those that may be indicative of cash flow issues, tend to be looked upon negatively.
Equity: Equity investors focus squarely on growth that leads to the sale of the company, as this is the source of their returns. Any capital request that does not accelerate revenue growth is looked upon unfavorably. And from an owner’s view, giving up a percentage of company ownership via equity financing is a costly way to acquire assets (real estate, equipment, etc) that could be obtained through debt financing.