Our Approach

Flexible mezzanine debt and equity structures + value creation

HCAP Partners specializes in providing mezzanine debt and private equity for the lower-middle market, an area of the economy that has been traditionally underserved by institutional capital. These small businesses are the growth engine that drives the economy and helps generate job growth.

Investment Criteria

$10-$100
Million Annual Sales
$1 Million+
EBITDA
$5M-$35M
Investment Range
Experienced
Management

Key Industries Served

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Healthcare

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Technology

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Services

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Manufacturing

Investment Structures

We consider a company’s individual needs to tailor alternative capital structures. Our investments are typically structured as mezzanine debt, preferred equity, majority control acquisitions, or minority growth equity.

Value Creation

We provide later-stage growth companies with capital and value-added resources (financial, industry, strategic) to help optimize performance and increase enterprise value while seeking to provide above-market returns to our limited partners. In addition, through our Gainful Jobs Approach™, we work to improve job quality and facilitate a positive impact on underserved businesses, their employees, and the communities they serve.

As active board participants, we work with our portfolio companies to help strengthen top management, increase operational efficiencies, and implement corporate governance systems. 

VALUE CREATION ROADMAP

  • PHASE 1: ASSESSMENT

    Initial evaluation of key risks and key strengths.

  • PHASE 2: IMPROVEMENT

    Operational Improvements through access to resources, expertise, and personnel.

  • PHASE 3: SUSTAINABILITY

    Sustainable, improved outcomes focused on growth, optimization, and efficiency.

VALUE-ADD SERVICES

  • Board of Directors / Board Observer participation

  • Strategic and budgetary planning

  • Recruitment of key management and board members

  • Access to expert consultants and service providers

  • Customer and strategic partner introductions

  • Assistance with raising capital and banking

  • Implementation of the Gainful Jobs Approach™

  • Assistance with exit planning, company sale process, and M&A

  • In addition to providing capital, HCAP Partners has contributed to us on so many more levels. First of all, we were able to form a board of directors thanks to their help. We also were able to hire some key executive team members, including our CEO.

    — Zeynep Ilgaz, Confirm Biosciences Founder

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  • Mezzanine debt, sometimes called subordinated debt, is similar to a regular bank loan with equity features to compensate us for taking greater risk. Like a bank loan, our mezzanine debt structures include current interest payable on the amount outstanding. While principal and interest are usually repaid quickly from available cash flow, our mezzanine debt has a more flexible amortization schedule that may include an interest-only period to facilitate growth. The equity features of our mezzanine debt may be structured as success fees, royalties, warrants, or a combination thereof. Warrants entitle us to buy stock at a fixed price at a future date.

  • HCAP Partners has the flexibility to provide equity as well as mezzanine debt. In cases where equity is required, we work with the company’s owners and management to develop a fair valuation metric agreeable to all parties.

  • Many of our portfolio companies encounter changes to their capital needs. Whether additional capital is needed for an acquisition, organic growth or due to an unforeseen obstacle, such as an economic recession or losing a major client, we work closely with management to forecast alternatives, then fund additional tranches of debt or equity accordingly.

  • HCAP Partners typically is a minority shareholder, so cannot force a sale of the company. Before committing equity, we spend considerable time to understand the business owner’s medium and long term goals, enabling us to establish an exit strategy for our investment that aligns with your longer term plans.

  • HCAP Partners lends privately-managed money, so we are not subject to the same regulatory restrictions as banks. We seek fair compensation given the amount of risk involved. HCAP Partners also lends on longer terms than banks and, as a result, we can afford to take a more patient approach. Notwithstanding, we do require our borrowers to meet some financial loan covenants, however, ours are not as stringent as those of banks.

  • The key industries we serve are healthcare, technology, services, and manufacturing.

  • HCAP does not finance start-up businesses.

Frequently Asked Questions