Financing Growth and Preparing for the Future: Striking the Right Balance Between Debt and Equity

17/04/2025

In an uncertain economic environment, a company's capital structure is a key factor in its performance and resilience. Excessive debt can weaken a business, while too much equity can limit its return on investment.

Why Optimize Your Capital Structure?

✅ Improve profitability: A balanced mix of debt and equity lowers the cost of capital and maximizes shareholder value.
✅ Boost attractiveness: Well-structured companies are more appealing to investors and financial partners.
✅ Maintain flexibility: The right structure allows you to seize strategic opportunities, such as acquisitions or international expansion.
✅ Reduce financial risk: Controlled debt protects against crises and market fluctuations.

🔍 Our advice: Regularly assess your financial structure to adjust your debt-to-equity mix based on your strategy and market conditions.

📌 Case Study: Capital Optimization in a French SME to Fund Growth

The Challenge:

Rapid growth in orders required investment in new machinery.
Strong but underutilized equity base.
Limited bank financing due to already high debt ratios.

The Solution:

1️⃣ Issuing Convertible Bonds

The company raised capital from investors by issuing convertible bonds.
Benefit: Attracted investors while deferring dilution for existing shareholders.

2️⃣ Optimizing Working Capital Requirements (WCR)

Renegotiated supplier payment terms to improve cash flow.
Implemented factoring to accelerate customer receivables collection.

3️⃣ Grants and Public Funding

Secured support from Bpifrance to fund industrial investment.
Used the Research Tax Credit (CIR) to finance innovation.

The Results:

✅ Increased investment capacity without excessively increasing debt.
✅ Improved cash flow and financial robustness.
✅ Sustained growth without compromising financial balance.

💡 Key Takeaway: An SME can optimize its capital structure by combining innovative financing tools with strategic working capital management to support growth.

Don't wait until the last moment to prepare your business transfer. The best transactions are planned well in advance.

For a personalized consultation or to discuss your plans, feel free to contact:

Lorraine Delannoy, Casteldoza Finance
📧 l.delannoy@casteldoza.com | 📞 +33 6 83 25 30 59

Let's turn your ambitions into reality—together.