In today’s hot economy, small and middle-market companies have many promising growth opportunities. But as a business owner, what financing is available to fund expansion, a capital investment or an acquisition once your company’s bank lines of credit have been exhausted?
Institutional capital could be your answer. Institutional capital can be used in a variety of business circumstances – for making acquisitions, buying out partners or meeting working capital needs when bank lines are fully used.

What's institutional capital?
Institutional capital is an unsecured debt that is subordinated to a company’s senior bank debt. It can be supplied by a variety of institutions – insurance companies, pension funds and other sources – and is generally used to fulfill long-term capital needs, with redemption or amortization not occurring until five years after the debt is issued. In exchange for taking a higher degree of risk than secured lenders, institutional investors assume minority ownership positions and become investment partners with business owners.

Institutional capital has some important long-term implications. For example, institutional capital is only cost-effective if it can help your company significantly improve profitability. It should also help increase the value of your stake beyond what it would be worth if you didn’t take on a new investment partner.

What type of company qualifies for institutional capital?
Though there are no "hard and fast" rules, companies that make the best candidates for institutional capital should generally need at least $3 million in funding, and have annual sales of $10 million and earnings of $2 million before interest, taxes and depreciation (EBITDA).