Equity & Debt Law Firm

Companies that need financing for their operations, future growth, or mergers and acquisitions usually do so through either equity or debt financing transactions. There are advantages and disadvantages for either type of transaction, and many companies use a combination of the two.  In either case, companies must rely upon experienced equity and debt transactional counsel to ensure that these financing arrangements are legal proper, advantageous and on terms suitable for the company’s business needs.

Companies that utilize debt financing obtain a loan or issue bonds to raise capital. Using debt as a source of funding is often more attractive than equity financing because equity investors take a material ownership stake in the company,  expect a higher return on their investment and will usually expect to receive a share of the company’s profits. The issuance of additional equity will also result in the dilution of existing owners. Finally, there are tax benefits to debt financing because interest payments on debt are treated as deductible operating expenses.

However, taking on too much debt may hurt the borrower’s cash flow, credit rating and hinder its ability to borrow money in the future. The amount a company may borrow may also be limited by loan covenants with existing lenders that restrict the company’s debt load.

Companies utilizing equity financing raise capital through the sale of shares in the business. This is often more expensive to the business than debt financing, but equity financing offers several clear-cut advantages, including:

• No required interest payments;
• The principal need not be repaid;
• There will be no impact on the company’s credit rating; and
• The company will not be subject to restrictive loan covenants.

There are also disadvantages to using equity financing, including the fact the issuance of additional shares will dilute the current equity holders’ ownership interests and reduce the firm’s earnings per share. Additionally, unexpected volatility in the company’s share price could also result in a share sale that does not raise as much as needed.

The experienced transactional attorneys at the law firm of Thomas H. Curran Associates can help clients with financing transactions by providing advice regarding equity and debt transactions that best suit the client’s needs. Our lawyers understand the nuances of business finance and can provide tailored options that will leave clients well-positioned for the future by securing the best possible terms for their debt or equity financing deal. The attorneys at Thomas H. Curran Associates have represented issuers, borrowers, lenders and investors involved in equity and debt financing deals and have tailored transactions to serve each client’s specific needs.