Business financing as a strategic decision

Business financing is a strategic decision that determines not only a company’s growth but also its survival. Choosing the right source, the right instrument and the precise timing can turn an opportunity into success — or turn a cash strain into an irreversible crisis. This analysis reviews the options available to mid-market companies: when to use each one, their advantages, their risks and their contexts of application.

The Spanish financial market is more diversified today than ever, and the figures confirm it. Private credit — any financing to companies involving a non-bank lender — reached around €33.1 billion in 2025, 1.96% of GDP, after multiplying fivefold since 2021, according to the Bank of Spain’s Financial Stability Report. Private capital broke its historical record with €7,015 million invested (SpainCap preliminary figure), and factoring and confirming moved assignments of €269,885 million, close to 25% of GDP. Traditional banking remains the core of the system, but it is no longer the only door. Sound financing advisory always begins by identifying the optimal structure for each situation.

How can I finance my company’s activity?

Every company has two broad sources of economic resources: its own and external funds. The proportion between them defines the capital structure and determines the company’s risk profile, cost and flexibility.

Own financing: comes from the company’s internal resources — accumulated cash, recurring cash generation, sale of non-strategic assets or shareholder contributions. It tends to be more stable but limited. By not depending on third parties, the company retains greater control over its liquidity and financial planning, and avoids contractual servitudes.

External financing: is obtained from outside sources, generally the financial system. It includes bank loans, debt issuance, leasing, factoring and other alternatives that entail a financial cost and contractual obligations. It expands investment capacity, but requires careful evaluation: poorly structured debt can erode profitability and compromise financial stability.

The optimal combination depends on the sector, the company’s stage, the volatility of the business and the appetite for risk. In stable businesses with tangible assets, higher leverage is sustainable; in cyclical or R&D-intensive businesses, own financing and equity are more appropriate. One structural fact the Bank of Spain itself stresses is worth recalling: in Spain only 7% of the financing of non-financial companies comes from the capital markets (bonds and shares), far below the euro-area average. That bank dependence is precisely why knowing the alternatives has become a competitive advantage.

When does a company need financing?

Companies need financing in three main scenarios, each with specific instruments and strategies:

  • Growth: when internal cash generation is not enough to finance investments (CAPEX, acquisitions, international expansion) or the working-capital growth consumed by rising sales.
  • Restructuring: when the current financial structure is inadequate — poorly calibrated maturities, excessive cost, concentration in a single institution, incompatibility with cash generation. Here the key is debt refinancing and restructuring.
  • Distress situations: when liquidity tensions, imminent insolvency or structural insolvency appear. These require a specific pre-insolvency approach under the Spanish Insolvency Act (TRLC).

Debt capacity: the key metric

Before proposing any financing operation, it is essential to calculate the company’s debt capacity. Failing to do so is the origin of 90% of mid-market debt crises.

The reference metric is CFADS (Cash Flow Available for Debt Service), also known in Spain as FCSD. It measures the cash actually available to service debt — interest plus principal amortisation — after covering operating expenses, working capital and maintenance investment. Its formulation:

CFADS = EBITDA ± ΔWC − CAPEX − Taxes

Where ΔWC is the change in working-capital requirements and CAPEX is maintenance capex. The reading is direct: if projected CFADS is below the annual debt service, the financial structure is unsustainable. This concept is explored in depth in our analysis of free cash flow.

Beyond CFADS, banks apply complementary ratios:

  • Net Financial Debt / EBITDA: measures effective leverage. A ratio above 4x in industrial companies usually signals over-indebtedness.
  • Interest coverage ratio (EBITDA / financial expenses): below 3x indicates narrow room for manoeuvre.
  • Current ratio: current assets / current liabilities. Reflects the ability to meet short-term obligations.
  • CIRBE: the Bank of Spain’s Risk Information Centre, with visibility over all bank risk lines, is the first source any institution consults when analysing an operation.

The cost of money in 2026: a stabilised environment

Calculating debt capacity requires understanding what debt costs today. After the 2024–2025 rate-cutting cycle, the European Central Bank held its deposit facility rate at 2.00% at its December 2025 meeting (with the main refinancing rate at 2.15%), the fourth consecutive pause. The 12-month Euribor, the dominant reference for Spanish corporate credit, closed at around 2.25% in early 2026. In that context, the average cost of new corporate loans stood at roughly 3.3%–3.4% (Bank of Spain data, May 2025), after falling between 60 and 76 basis points in a semester.

The message for the CFO is clear: the cost of debt has not risen, it has stabilised at reasonable levels. That said, market forecasts (some houses anticipate a slightly higher Euribor in 2026) should be treated as estimates, not certainties.

Main financial products in the market

The menu of traditional financial products is wide. The key is not to know them all, but to choose the right one for each need.

Bank loan

The loan is the most common form of business financing. It consists of obtaining a fixed amount of money from a financial institution, repaid over a set term through periodic instalments that include principal amortisation and interest. Loans can be bilateral (a single institution) or syndicated (several institutions under a common agreement, typical in operations above €20 million). The critical distinction is the term, which must be aligned with the use of the capital. A frequent error is financing long-term assets with short-term debt, generating a mismatch that sooner or later triggers treasury tensions.

Credit line

Unlike a loan, a credit line allows funds to be drawn up to a maximum limit, using them as needed and paying interest only on the amount drawn. It is ideal for covering seasonal treasury gaps or occasional working-capital needs.

Microcredits and public financing

Microcredits, together with ICO lines, ENISA loans and other public financing schemes, are designed for entrepreneurs and SMEs with difficulties accessing traditional financing. The ICO Companies and Entrepreneurs line finances up to €12.5 million per client per year, with terms of up to 20 years and grace periods of up to 3; and since 2025 the ICO has launched direct-financing lines to SMEs without an intermediary bank. ENISA’s participating loans — which in 2025 financed 514 companies with €86.2 million — reach up to €1.5 million without requiring guarantees or personal collateral. Note that since 2025 ENISA has unified its former lines (Young Entrepreneurs, Entrepreneurs and Growth) into a single general line with flexible conditions according to the company’s stage.

Leasing

Leasing is a financial lease agreement that allows a company to use capital goods without buying them. At the end of the contract, it can choose to acquire the asset by paying a residual value. It is especially useful for acquiring machinery, vehicles or technological fixed assets without committing the operation’s cash, and offers tax advantages through the deductibility of the instalments.

Renting

Renting is similar to leasing, but with no purchase option at the end. The monthly fee usually includes maintenance, insurance and other associated services. It is the preferred option for companies that need to renew equipment frequently (vehicle fleets, IT hardware, rapidly obsolescent machinery).

Factoring

Factoring is a short-term financing mechanism that converts accounts receivable into immediate liquidity. A financial institution (the factor) advances payment of pending invoices in exchange for a fee. It can be with recourse (the company still bears the default risk) or without recourse (the risk is transferred to the factor). It is not a marginal instrument: according to the Spanish Factoring Association, factoring moved €127,984 million in assignments in 2025, and Spain is the third European country by penetration over GDP.

Confirming (reverse factoring)

Confirming is the reverse operation of factoring: the company delegates the management of payments to its suppliers to a financial institution. It usually includes the option for suppliers to collect early, which improves commercial relationships and strengthens the negotiating position. In Spain, confirming has already overtaken factoring in volume: €141,901 million in assignments in 2025, 52.6% of the sector’s total.

Invoice advance and commercial discount

Both are mechanisms for advancing collections. The invoice advance allows the company to receive the amount of an invoice before its due date, retaining responsibility for collection. The commercial discount applies to commercial instruments (bills, promissory notes, receipts): the institution advances the amount, discounting interest and fees.

Cash pooling

For groups with several companies, cash pooling centralises treasury, offsetting balances and minimising the group’s net financial cost. It is an essential tool for optimising cash in structures with multiple entities.

Main alternative financing options

Alternative financing — everything that is not traditional banking — has grown exponentially over the last decade. It offers flexibility and speed, usually in exchange for a higher cost. Its scale is no longer anecdotal: private-credit flows as a percentage of bank-credit flows tripled between 2021 and 2025 in Spain, according to the Bank of Spain.

Private debt funds

Specialised investment funds offering structured debt (senior, mezzanine, unitranche) with more flexible conditions than banks: cash sweeps, PIK interest, covenant-lite, bullet tranches, higher leverage. They typically enter leveraged operations (LBO/MBO), build-ups and fast growth where traditional banking does not reach. The cost is higher (IRRs between 8% and 15% depending on risk), but the agility and the absence of operating veto compensate. Their weight is increasingly significant: in the private-equity operations closed in Spain in 2025, direct lending financed 49% of the volume, ahead of banks (32%), according to DC Advisory. Unitranche represented 36% of the structures.

Mutual Guarantee Societies (SGR)

SGRs facilitate access to credit for SMEs and the self-employed by offering guarantees to financial institutions on behalf of their members. This makes it possible to obtain better conditions on rate, term and fees. Each Autonomous Community has its own SGR (Elkargi, Iberaval, Avalis, Afín SGR, etc.). They are especially useful when the company lacks sufficient real guarantees.

Private Equity and Venture Capital

These funds invest in companies with high growth potential in exchange for a stake in their capital. They contribute not only capital but also strategic advice and networks of contacts. Their focus varies by stage: venture capital for startups and early-stage companies; growth equity for expanding companies; private equity for consolidated acquisitions. The sector is enjoying a sweet spot: according to SpainCap, in 2025 private capital invested a record €7,015 million, of which €3,039 million went to the middle market (operations of €10–100 million of equity), 37% more than the previous year.

Business Angels

Business angels are private investors who finance projects at very early stages (seed and series A) in exchange for an equity stake. In addition to capital, they contribute sector experience, mentoring and access to networks that are often as valuable as the money itself. In Spain, networks such as AEBAN or Big Ban Angels bring together the leading investors.

Capital markets and bond issuance

From a certain size — typically companies with EBITDA above €15–20 million — the capital markets become a competitive alternative. They offer access to institutional and retail investors in both debt issues (bonds, commercial paper, notes) and equity. In Spain, the MARF (Alternative Fixed-Income Market) is the natural gateway for medium-sized corporate issues.

Crowdfunding and collective financing

Financing raised through digital platforms from a large number of non-professional investors. It can be reward-based, loan-based (P2P lending) or equity crowdfunding. Since 2023 it operates under the European ECSP Regulation, with the CNMV as supervisor: by mid-2026 there were 27 authorised platforms in Spain, with a fundraising limit of €5 million per project. The market raised €761.6 million in 2025, up 46% on the previous year, led by real-estate crowdfunding. It is more oriented towards startups, impact projects or SMEs with clear, communicative value propositions.

How to choose the right financing?

The optimal financing structure is the one that minimises total cost (financial + operating + opportunity) while preserving the company’s strategic flexibility. To reach it, a rigorous analysis must consider five variables:

  • Stage of the business cycle: a startup, an expanding company and a mature company have radically different needs and risk profiles.
  • Current credit profile: implicit rating, financial ratios, quality of available guarantees and track record with the banking pool.
  • Use of capital: a multi-year CAPEX is financed differently from seasonal working capital or an M&A operation.
  • Total effective cost: not only the nominal interest rate, but fees, guarantees required, covenants and the opportunity cost of the restrictions assumed.
  • Impact on ownership and governance: equity options (rounds, private equity) dilute shareholders and modify corporate governance; debt does not dilute but introduces contractual servitudes.

Common mistakes in the search for financing

The experience accumulated over hundreds of operations allows us to identify the most frequent mistakes:

  • Seeking financing too late: when cash has deteriorated and the negotiating position is weak. Anticipating is the decisive factor in securing good conditions and avoiding insolvency proceedings.
  • Concentrating risk in a single institution: losing banking diversification exposes the company to a single institution’s unilateral decisions. The ECB’s SAFE survey for the fourth quarter of 2025 showed that only part of SMEs perceived an improvement in credit access, and that 7.5% already found difficulties: diversifying the pool is the best defence.
  • Maturity mismatch: financing long assets with short debt or vice versa.
  • Not including grace periods: especially in restructuring operations or growing startups, where the business needs time before generating cash to service the debt.
  • Accepting unbearable covenants: contractual clauses that can automatically accelerate maturity and precipitate a crisis.

How Maraz Corporate Finance helps you

At Maraz Corporate Finance we support mid-market companies throughout the process of structuring and obtaining financing:

  • Analysis of the current financial situation and the banking pool.
  • Financial modelling of the business plan and quantification of needs.
  • Design of the strategy with traditional banks and with alternative investors.
  • Negotiation with financial institutions, debt funds, PE/VC firms and business angels.
  • Structuring of syndicated, mezzanine, unitranche or equity operations.
  • Negotiation of the terms and the guarantee package.
  • Full execution of the operation and post-closing monitoring.

When the company needs to reinforce its financial management during the process, we cover it with a fractional CFO who ensures reporting, modelling and technical dialogue with the institutions. If your company needs to explore corporate financing options, assess a debt refinancing or address a distress situation, get in touch with our team for an initial, no-commitment analysis.

 

Javier de Rojas Roca de Togores

Partner – Maraz Corporate Finance

 

FAQs on Business Financing Options

What is the best financing option for a company?

There is no absolute “best” option: the choice depends on the stage of the business cycle, the use of capital, the credit profile and the appetite for risk. Mature companies with tangible assets usually optimise with traditional bank financing (syndicated or bilateral loans); fast-growing companies benefit from private debt funds or equity rounds; startups without recurring cash find their fit in business angels or venture capital. The key is to design the structure that minimises total cost while preserving strategic flexibility.

What is the difference between bank financing and alternative financing?

Bank financing operates under a strict regulatory framework (Basel III/IV), which makes it cheaper but more rigid in terms of guarantees, ratios and covenants. Alternative financing — private debt funds, direct lending, mezzanine — has greater freedom to design tailor-made structures (terms, tranches, PIK, cash sweeps), assumes more risk and is therefore more expensive. In leveraged operations, LBOs or disruptive growth, the alternative is often the only viable route.

How is a company’s debt capacity calculated?

The reference metric is CFADS (Cash Flow Available for Debt Service): CFADS = EBITDA ± change in working capital − maintenance CAPEX − taxes. If projected CFADS is below the annual debt service (interest + amortisation), the structure is unsustainable. Banks complement this with ratios such as Net Financial Debt / EBITDA (ideally below 4x in industry, up to 6x in sectors with very tangible assets) and interest coverage (EBITDA / financial expenses, minimum 3x).

Is it advisable to diversify financing sources?

Yes, and proactively. Banking diversification (a pool of at least 3–4 institutions) reduces dependence and improves the negotiating position. Combining bank debt with alternative funds, working-capital lines (factoring, confirming) and market instruments (MARF) adds resilience. A pool concentrated in a single institution is a strategic vulnerability: any unilateral decision by that institution — a change of policy, a change of committee — compromises the company.

What financing options exist for companies in difficulty?

Distressed companies have specific instruments protected by the Spanish Insolvency Act (TRLC): interim financing (during the negotiation of the restructuring plan) and new financing (committed in the court-sanctioned plan). Both enjoy payment priority and shielding against clawback actions. In addition, the distressed-debt market — specialised funds such as Cerberus, Anchorage or Bain — provides liquidity to operations that traditional banking rejects.

When is an equity round preferable to debt?

An equity round is preferable when: (1) the company does not generate enough cash to service debt; (2) the project has high potential but high uncertainty; (3) the shareholders seek a strategic partner in addition to capital; (4) prolonged cash burning is needed before profitability (typical in tech and biotech). The trade-off is shareholder dilution and the entry of a new partner into corporate governance, with implications for management and strategic decision-making.