Recaps For Small Businesses Good Or Bad?
Recaps for Privately Held Businesses, Good Or Bad? November 20, 2017 by Michael Shea PA (Edit) What’s a Recap and Why Should I Care? Definition: A Recapitalization or Recap is a financing technique used typically by private equity investors to invest in privately-held businesses that allow the existing owner to restructure the debt and equity of their company to either obtain new capital for future business growth and/or to reduce their personal financial risk by taking some chips off the table. Recaps are typically structured in such a manner as to repay any existing debt that has been personally guaranteed by the existing owner. This is one of the main benefits in that it reduces the owners’ personal financial risk from their personal guarantees on bank loans, capital leases, etc. If a “Black Swan” event occurs and the business flounders, the owner has at least taken substantial money off the table and avoided losing everything. Recaps include a reducti...