Entrepreneurs think early about many things: market position, technology, sales, customer service. But when it comes to capital structure, the mix of equity and debt, many only start thinking seriously about it when it is already too late: when the bank reduces the credit line, liquidity becomes tight, or a refinancing is due.
This is no coincidence, it is structural.
Capital structure a universal principle
The renowned capital structure theory of Franco Modigliani und Merton H. Miller provides the academic starting point. In their classic irrelevance theorem from 1958, they stated:
“In perfect markets, the value of the firm is independent of its capital structure.”
Franco Modigliani & Merton H. Miller (1958)
In perfect markets, it therefore does not matter how much equity or debt a company has, the value of the company remains the same.
At the same time, they stated:
“Corporate financial policy has to be judged by its effect on the expected earnings per share and the intrinsic value of the shares.”
Franco Modigliani & Merton H. Miller
Financing policy must be measured by the actual value for the owners, not by mechanistic rules.
Together, these two statements provide a clear reference point: in reality, capital structure does influence enterprise value, as soon as markets are not perfect, and they never are.
Banks are not risk takers but liquidity providers
A widespread misunderstanding among entrepreneurs is:
“Banks are risk-averse, they don’t want to take risk!”
Deceptively simple, but factually correct, and historically confirmed:
Deceptively simple, but factually correct, and historically confirmed:
Already in early European capitalism, banks such as the Medici or later the Fugger were primarily liquidity providers against collateral. Their business was to provide money, not to bear risk. Risks were traditionally borne by those who invested their own capital: equity investors.
The same is true today:
Commercial banks are designed to limit credit risk and ensure debt service. They refinance through deposits, markets, and internal capital ratios, they do not take entrepreneurial risk.
Or, as Martin Wolfram Steininger puts it perfectly:
“Anyone who believes the bank bears the risk has not understood the banking business.”
Martin Wolfram Steininger, Senior Managing Partner & CEO, BlackSwan Capital
That is why the rule is:
Risk is borne by equity.
Equity is the true risk buffer in a company. Debt is a liquidity instrument in exchange for interest and collateral.
The problem in the DACH region
Compared to many other markets, such as the United States, the equity ratio in the DACH region tends to be lower.
There are several reasons for this:
- Less well-functioning equity markets for mid-sized companies and SMEs, less available, less liquid
- Cultural reluctance towards external investors, entrepreneurs prefer to keep 100 percent control
- A bank-driven financing tradition, debt remains the standard, equity only becomes a topic when banks set limits
In the United States, by contrast, private equity, venture capital, and other forms of equity have played a central role in growth financing for decades, from start-ups to established mid-sized companies.
Entrepreneurs only think about equity when the bank demands it
Many mid-sized entrepreneurs only turn to external equity when:
- the bank reduces the credit line,
- demands additional collateral,
- or no further debt liquidity is available.
At that moment, however, negotiating positions are weak, and strengthening the equity base happens out of necessity, not as a strategic decision.
This leads to:
- worse terms,
- higher dilution (if equity investors are involved),
- and often a suboptimal long-term structure.
The right capital structure creates value
From a practical perspective, optimal financing does not mean:
maximum leverage
or no equity investors
It means:
A balanced mix of equity and debt that
- minimizes capital and financing costs (WACC),
- keeps risks manageable,
- and gives the company flexibility for growth and strategic options.
Why is equity important?
It absorbs losses without immediately consuming liquidity
It strengthens balance sheet resilience
It improves credit perception
It expands room for manoeuvre in crises
How BlackSwan helps companies achieve the optimal capital structure
An optimal capital structure is not created by a single product, but by a strategic combination of capital types, maturities, covenants, and flexibility. This is exactly where BlackSwan comes in.
Our approach is not to “finance” the liability side, but to actively shape it, with the goal of securing liquidity, enabling growth, and strengthening the equity base in the long term.
1) Strengthening the equity base
Equity is the central risk buffer of any company. BlackSwan supports with:
- preparation and positioning towards equity investors
- structuring of investments (minority / majority / growth equity)
- selection and outreach to the right investors
- negotiation leadership, valuation, terms, and closing process
The goal is not “capital at any price”, but capital on terms that strategically strengthen the company.
2) Mezzanine capital as a bridge between bank debt and equity
Mezzanine capital is often the most efficient way to:
- economically improve the equity ratio
- relieve banks (covenants, collateral, rating)
- finance growth without immediately giving up control
BlackSwan structures and places mezzanine solutions, including:
- subordinated loans
- profit participation rights
- convertible instruments
- structured hybrid financing
3) Restructuring the liability side
When financing has grown historically, inefficient structures often emerge:
- wrong maturities
- expensive tranches
- collateral chaos
- covenant pressure
- lack of flexibility
BlackSwan analyses the entire liability side and develops a structure that is:
- more stable,
- cheaper,
- and sustainable in the long term.
4) Debt restructuring and refinancing
Whether growth phase, interest rate environment, acquisition, or crisis mode, refinancing is often the fastest lever to regain room for manoeuvre.
BlackSwan supports:
- refinancing of existing credit lines
- syndicated structures and reconfiguration of banking groups
- maturity extensions, covenant resets, and repricing
- reorganisation of collateral and cash flow waterfalls
5) Ergebnis: Finanzierungsstruktur als Wettbewerbsvorteil
An optimal capital structure is not just a finance topic.
It determines whether a company can:
- seize opportunities
- survive crises
- invest
- finance acquisitions
- and remain strategically independent
BlackSwan ensures that financing does not become a brake, but a strategic enabler.
Fazit: Frühzeitig denken, strategisch handeln
Entrepreneurs are well advised not to optimise capital structure only in a crisis.
It should be an integral part of strategic financial planning, not a derivative of bank requirements.
Equity is not a last resort.
It is a strategic value driver.
And one thing remains clear:
Banks are liquidity providers, not risk takers.
Risk is borne by the capital of the owners.
That is why every company needs a solid equity base before pressure builds.
Let’s talk
Don’t wait until the bank says “No”.
BlackSwan helps you optimise your capital structure before pressure rises and your negotiating position deteriorates.
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