FINANCE
Cultivating Capital
Long-term relationships and large-scale investments foster financial growth By Tracy Barbour
C
apital-intensive investments can help businesses enhance their operations, capture a larger market share, and boost revenue and profits. These distinctive types of investments—which are typically largescale, long-range, and high-cost in nature—encompass multiple facets and complexities. Often, capital investments entail the acquisition of businesses, buildings, land, vehicles, and equipment, as well as major construction and maintenance projects. Regardless of the assets and intricacies involved, the key objective for investors is to grow capital and generate long-term value.
20 | April 2021
The Need for Capital Many projects need capital to acquire the assets or infrastructure necessary to begin or continue operations, but capital can be hard to come by in Alaska, according to Rob Gillam, CEO and chief investment officer of McKinley Capital Management. There are generally three sources of capital available to Alaska businesses: bank loans, small business loans, and private or public bonds. “Bank loans are generally based on asset and cashflow, meaning companies that qualify tend to need both a significant value of assets and cashflow production on those assets,”
Gillam explains. “Bank loans, therefore, tend to only be available to the biggest and most well-financed companies and are not generally available to startup or distressed companies. And of course, in the recent pandemic, banks all across the United States tightened lending standards, making this capital more difficult to obtain.” Continuing, Gillam says: “Small business loans from the SBA [Small Business Administration] or USDA [US Department of Agriculture] can provide smaller-sized capital. These loans typically require a personal guarantee and are usually capped out at about $7 million. These loans tend to have more
Alaska Business www.akbizmag.com
