Working capital vs. equity: how to choose the right fuel for growth

At a recent event co-hosted with TL;DR our Head of Commercial Felix Lundqvist joined Gabbie Swycher from Redrice to speak with a room full of fast-growing FMCG brands about how to strike the right balance between working capital and equity when financing growth.

Working capital financing vs. equity investment

• Equity investors want their capital to fund growth, not inventory purchases or long cash conversion cycles.

• Working capital financing is often better suited for inventory, payment term gaps, and bridging timing differences.

• Equity should be used when taking on strategic moves (new markets, new capabilities), not simply to fund stock.

• Founders need to understand payment terms, inventory turnover, and customer payment cycles to avoid surprises.

“What we don’t particularly want to do is lend money to buy products - for us, that is where working capital steps in” Gabbie Swycher, Redrice

What investors look for

• A realistic, not overly optimistic, financial model with thoughtful scenario planning.

• Understanding of cash conversion cycles and when to use debt vs equity.

• Sensible leverage -  too much debt becomes a burden and makes equity money go into repayment instead of growth.

• Product-market fit, especially by Series A: knowing the customer, where to reach them, and how to sell to them.

• Transparent and consistent reporting (P&L, cash, contribution margins).

“Do you understand working capital cycles and therefore at what point you need equity and what point you can leverage with debt?” Gabbie Swycher, Redrice

Fundraising strategy

• “Always be fundraising”: relationships with investors and lenders should be built early, not only when money is urgently needed.

• Raise when you don’t need the money - you’ll negotiate from a position of strength.

• Keep both debt providers and equity investors updated to speed future processes.
  
  “Having regular dialogue with investors and debt providers means you’re selling without selling” - Gabbie Swycher, Redrice

Marketing spend

• Many consumer brands spend 30-40% of revenue on marketing; up to 50% becomes concerning unless unit economics are strong.

• Growth expectations for such high spend is to typically double revenue year-on-year.

• Lenders assess whether marketing spend is the last money left, or whether strong backing exists to sustain the plan.

“It comes down to the ROI of those marketing investments - and whether it’s the last money you have or part of a long-term plan with strong backing” - Felix Lundqvist, Mimo

Budgeting for 2025-2026

• Use historical data wherever possible.

• Ensure cross-functional collaboration (ops + finance).

• Build an agile supply chain to flex spend up or down as needed.

• Preserve optionality: build toward profitability even if you later choose to invest heavily in growth.
  
  

The discussion made one thing clear: the strongest brands are the ones that truly understand their cash cycles and use the right capital for the right jobs. Equity should fuel big strategic moves; working capital should keep your operations moving without costing you ownership.

Find out how Mimo Flex can help your business here.