Why get debt when I just raised equity for my CPG business?

You’ve successfully closed your latest funding round, and your balance sheet is the strongest it’s ever been. With significant equity in the bank, the path forward seems clear: use that capital to fuel every corner of the business.

However, for high-growth, middle-market CPG brands, the most sophisticated move isn't to spend all that equity on operations; it’s to protect it. While equity is your most powerful tool for building long-term enterprise value, it is an expensive way to fund the day-to-day of a scaling brand. Here is why leading founders pair their equity with an asset-based line of credit (ABL) to maximize their capital efficiency.

1. The Efficiency Play: Optimize Your Cost of Capital

Equity is your most valuable resource. Once deployed, its cost is measured in the future valuation of your brand.

• High-Leverage Equity: Equity should be reserved for "Infinity ROI" bets: investing in top-tier talent, R&D, and customer acquisition. These moves are designed to exponentially increase your company's worth.
• Low-Drag Debt: Inventory and accounts receivable are fixed-margin assets. Using 20%+ cost of equity to fund an asset with a defined ~30% margin is a structural mismatch.

By layering in an ABL, you allow your working assets to pay for their own growth, keeping your “expensive equity” available for the strategic initiatives that will actually move the needle on your valuation.

2. Solving the Timing Trap

Success in the middle market ($25MM–$75MM+ net revenue) creates a specific structural challenge. Even with cash in the bank, your capital often becomes trapped in the supply chain:

• Production Lead Times: You pay for production months in advance.
• The Payout Lag: Even when selling to retail giants like Sephora or Target, wholesale payout cycles often lag by 30 to 60+ days.

An Assembled Brands credit facility immediately turns the locked-up value of your assets back into working capital by advancing against your inventory and AR. This ensures your equity remains liquid for growth rather than being tied up in a 60-day payout window.

3. The Accordion: Scaling at the Speed of Demand

Relying solely on equity means that every major retail win, like a 1,000-store expansion, for example, requires a manual reassessment of your cash position. It forces you to choose between slowing down and dipping further into your runway.

Our accordion facilities are built for this scenario:

• Seamless Expansion: As your business performs, inventory and receivables grow, your credit limit expands alongside them.
• Zero Friction: There is no need to return to the board for more capital just because a SKU went viral. The liquidity is already included in your capital backbone, ready to be deployed.

4. The Bridge to Bankability

Middle-market brands often outgrow early-stage fintech apps and merchant cash advances before they are ready for traditional commercial banks. Assembled Brands provides a professionalized debt structure without the institutional friction:

• No Lockboxes: You maintain control over your cash flow and daily operations.
• No Personal Guarantees: We underwrite to the strength of your brand’s assets, not your personal assets.
• Operator-to-Operator Underwriting: We understand the nuances of CPG, offering higher advance rates than generalist lenders.

The Bottom Line

Equity creates the engine. Debt provides the fuel. By partnering with Assembled Brands, you ensure that your most expensive capital stays focused on the future, while your most reliable assets fund the present.

Maximize your runway. Preserve your ownership. Let’s build a capital backbone that scales alongside your growth!

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