December 10, 2013
Running your own business often means investing a substantial portion of your personal wealth in it. This can potentially yield big returns, but it also brings some risk: Short of other successful investments, your financial future might be tied to the performance of that business and its industry. Meanwhile, most of your assets might be illiquid.
Some business owners turn to recapitalization to diversify their holdings, gain liquidity, scale back their involvement in the business or even cash out completely, says Elliot Jaffee, Head of Commercial Banking for U.S. Bank. Simply put, recapitalization is a financial transaction where the business’ capital structure is adjusted or supplemented with other forms of financing.
"Every business owner's goals and situation are unique," says Mike Ott, President of The Private Client Reserve.
“If you’re looking to reduce debt, generate liquidity, raise cash for growth or even exit the business, recapitalization might be an option. Your Wealth Management Advisor and Private or Commercial Banker are here to help you identify options to work toward your goals.”
Here are two scenarios in which you might consider a business recapitalization.