Raise Capital | Lantern’s Process To Raise Capital

How Most Financial Advisors Raise Capital

The typical process to raise capital by most financial advisors who work with established growing companies is to charge an upfront retainer of $25,000 (or more), and then earn compensation upon funding (called a ‘success fee.’) Success fees can vary significantly but often range between 2% and 10% of the capital raised.  While bankers rationalize it is ‘success based’ the process to raise capital can be very expensive easily costing $500,000 or much more for the company seeking the financing.  Even more important, this approach can lead to other drawbacks or conflicts that can work against the best interests of the client. 

These conflicts to raise capital can include: fee structures that pay much more for raising equity than debt, receiving equity ownership in a client based on the valuation of the investment, long (typically 2 year) ‘lock up’ or exclusivity periods, and the acceptance of finder’s fees from the funding institutions.  (For more information, see our related White Paper: “Investment Banking Fees Examined.”)   Taken collectively, these common practices should make clients wonder whether the financing opportunities presented by the success based advisor are really best for the client or the broker.  

How We Raise Capital:  

Lantern Capital Advisors succeeds in quickly finding appropriate growth capital financing solutions that limit ownership dilution for our clients.  We use a proven methodology in order to source capital and negotiate financing terms that satisfy both our clients and financial institutions.     There is no one out there that does what we do, that is as successful as we are at raising capital for our clients, or that can raise capital for less.  Over half of Lantern's growth capital raising engagements involve financing amounts over $10 million.  We take no equity or warrant positions in our clients.  

Lantern Capital Advisors raises both debt and equity on behalf of our clients.  Our ultimate objective is to ensure that our clients don’t give up control of their business to outside investors in order to support growth.  We help our clients transform their business to high growth enterprises with high multiple valuations.  We are repeatedly selected by our clients to work for them again, because they trust that our insight and value for raising capital, and corporate financial planning differentiate us from our competition. 

Lantern Capital Advisors is a corporate financial consulting firm that uses our own process to raise capital that differs significantly from investment bankers and capital brokers in two key ways:  

1) We raise capital strictly on an hourly, fee-only basis.  

Rather than seeking large success fees to raise capital, and to be fair to our clients of all sizes, we choose to work on a simple, hourly, fee-only basis. As consultants, this removes any economic incentive to recommend one financing solution or provider over another. We also use reasonable consultant billing rates that are comparable to working with an outsource CFO or middle market CPA or law firm.   This simple approach drastically reduces the cost to clients to raise capital, and removes all conflicts of interest or potential for ‘self dealing.’ 

2) To achieve consistent results, we work in 3 phases in order to raise capital for our clients.


Phase 1: Develop Financial Strategy and Plan

We start each engagement to raise capital by meeting with the client and understanding their business and strategies.  We then create a comprehensive financial plan.  Once we have created that financial plan, and it is reviewed by the client, we share the financial plan on a ‘no-names’ basis with a few financial institutions we believe will likely want to fund our client’s business.  Our goal is to identify interested institutions very early in the process (ideally in the first couple of weeks). By doing so, we are able to quickly and cost effectively demonstrate to our client that we can deliver them interested funding sources.  

Our goal during this step in our process to raise capital is to have our clients financing need in front of interested funding sources at an engagement cost that is less than half the upfront retainer charged by most investment bankers and capital brokers.  

Phase 2: Assess Capital Markets

Once we have successfully completed the financial strategy and planning phase, we then (with our client’s permission) access the capital markets in a systematic and effective way.

To do that, we finalize the company business plan, then distribute that business plan to not only those firms that expressed interest earlier in our process, but many others as well. By doing it this way, we enable our clients to ‘play the numbers’ and create competition for funding which can save them millions in financing costs. (As eLoan says,”when banks compete, you win.”) This approach, which is completely unique to Lantern Capital Advisors, has worked consistently well. Since implementing this process, we have delivered financing offers each time we have accessed the capital markets.

Once institutions deliver financing proposals to our clients, we work to ensure they understand all of the financing solutions presented, analyze the proposals to compare them against one another, negotiate the proposals on behalf of our clients, and consult with our clients throughout due diligence and funding in order to secure the best outcome for the business owner.

For a further explanation of our process to raise capital, please see our White Paper, “Eureka! A Better Way to Raise Capital and Explore Financing Alternatives.”

Phase 3: Corporate Financial Planning: Analyze, Adjust, Achieve

After funding is complete, we also help our clients achieve their ultimate goals through corporate financial planning services.   With their permission, we help them further use ‘finance’ not only to fund their initiatives but to also make better decisions, and adjust their plans as their business and markets change.

By combining a simple, fee-only approach to raising capital with our proven consulting process, we are able to consistently help clients raise capital with a level of quality and cost that is unmatched by other advisors.