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The CFO of a national commercial window manufacturer called his National Business Capital advisor. They had plenty of orders, big ones, enough to keep the line busy for months. However, when a few large payments were delayed, their cash flow tightened rapidly. Vendors weren’t being paid on time, and production schedules began to slip.
The business was fundamentally healthy. However, the CFO said their senior lender wouldn’t extend an overadvance. He didn’t need a bailout—just space to manage through turbulence. The business required breathing room now, not in six months.
Recognizing the fine line between short-term pressure and long-term stability, his advisor arranged $1.5 million in subordinated debt. Enough to help the company catch up, pay vendors, and keep production moving—without derailing the bigger picture.
Capital discipline enables the use of the right capital at the right time for the right reason. It sets apart the companies that adapt from those that stall.
Key takeaways
- More capital isn’t the answer.
The strength of your capital stack comes from alignment—not accumulation. Structure, timing, and control matter more than volume. - Treat capital as a living system.
Capital must flex with the business. Use decision points, not fixed schedules, and recalibrate often—not once. - Use different capital for different jobs.
Internal, external, and contingent capital each serve distinct purposes. The value is in the orchestration, not just the access. - Creativity is a financial skill.
The best capital strategies aren’t reactive—they’re composed. Shaping the right layers, in the right order, is a creative act that protects control and unlocks growth.
What is capital?
Capital is not a trophy. It’s not a plan. It’s a tool, an instrument.
Like any instrument, it only works if it’s expertly tuned and used correctly. Your business doesn’t need to gather MORE capital. It needs to structure the kinds of capital sources it already uses and have them align with how the company operates.
Multiple types of capital exist, but they can be categorized into the following layers:
- Internal Capital
Cash flow. Retained earnings. Reallocation.
This is your most flexible source. You control it. But it’s limited, and can weaken the business if overextended. Best used when speed and autonomy are most important. - External Capital
Loans. Leases. Lines. Investors.
This adds reach, but comes with tradeoffs: repayment terms, covenants, oversight. Use it when the structure aligns with the purpose and timing. - Contingent Capital
Vendor terms. Undrawn credit. Emergency reserves inside loan agreements.
These don’t typically appear in daily operations, but they’re ready when conditions change. They’re not backups. They’re structured readiness—undercurrent, prearranged, essential.
Most businesses already utilize these forms of capital. But using them individually isn’t enough. The real advantage comes not from having the instruments, but from arranging them. That’s where calibrating the capital stack begins.
What is the Capital Stack (and why it matters)
Every business has a capital stack—whether they call it that or not. It’s simply the mix of funding sources you use to operate, grow, and adapt. Like an orchestra, these different instruments work together in synergy to provide the financial resources that drive the business forward.
Too often, however, the stack forms reactively: a loan here, a lease there, some retained earnings in the middle. The parts exist, but they’re not purposefully calibrated.
Optimizing your capital stack is the discipline of intentionally deploying these different types of capital – internal, external, and contingent – so each plays a distinct role and aligns with the business’s operational rhythm.
A note on terminology: Capital Stack
In this article, we refer to the capital stack, which should not be confused with the concept of loan stacking, which is sometimes also referred to as capital stacking.
These concepts both involve combining different funding sources. However, they differ significantly in their intentionality and impact on risk and return.
Loan stacking occurs when a business owner obtains multiple loans from various lenders within a short timeframe, usually without informing each lender about the other loans. The intent is typically to secure a larger total amount of capital than a single lender would provide. Loan stacking is generally considered risky for the borrower, as well as the lender.
Optimizing the capital stack, (which can, confusingly, also be referred to as capital stacking) on the other hand, is a more strategic and structured approach, particularly common in commercial real estate and business funding. It involves intentionally combining various financing instruments, such as debt (senior debt, mezzanine debt), preferred equity, and common equity, to fund a project or company.
The capital stack represents a hierarchy of claims, outlining who gets paid first and who bears the most risk in the event of default or liquidation. This approach allows businesses to:
- Access diverse funding sources, potentially combining the lower cost of senior debt with the growth potential of equity.
- Optimize the cost of capital by balancing different layers of financing.
- Tailor financing structures to specific project needs and risk appetites.
- Diversify risk among various stakeholders.
Capital Stack is a standard practice in corporate finance and a part of a growing company’s Capital Intelligence.
A capital stack isn’t the tidy vertical column the name suggests.
It doesn’t contain solid, static layers. In practice, it is a flexible web woven from different strands of capital, each meant to carry a different part of the load. Its strength comes not from uniformity or volume, but from orchestration. The business leader becomes conductor, deploying different capital uses to match the strategy—some bold, some subtle, and some reserved until called upon.
The three tensions in the capital stack
The goal of a capital stack is to create a funding structure that flexes with the business and holds tension without breaking, allowing the company to grow deliberately, creatively, and in tune with what’s happening.
Achieving the right calibration involves working with three key tensions:
- Timing and Volume
Capital works best if it’s available when a business needs it, not before, not after. More isn’t helpful if it arrives at the wrong time. One way or another, the borrower is paying for capital. - Flexibility and Fit
Some capital may look good on paper, but does it fit how the business runs? If it limits your options or forces suboptimal decisions, it’s the wrong kind of help. - Preparation and Calibration
Growth doesn’t wait for a perfect setup. The work is to recalibrate while not overpreparing, and stay ready when conditions shift. Calibration isn’t a one-time correction. It is dynamic and ongoing.
The strength of your capital stack isn’t due to its size. It’s how the parts are tuned to support the business in motion—covering today, enabling tomorrow, and absorbing shocks when needed.
Tension one: Timing and volume
This tension doesn’t manifest as an “either-or” situation.
Most problems don’t arise from having too little capital. They come from having capital that’s out of sync with the business rhythm.
Too early, it sits unused, eroding margins rather than strengthening them. Too late; it’s purely reactive, unable to alter the outcome.
Capital that’s aligned with the right timing protects the business’s ability to act. It preserves judgment and gives leaders room to act when faced with opportunities.
What could that look like in practice?
- Drawing on a credit line when a large order is confirmed – not to “be safe,” but to match working capital to revenue flow.
- Delaying an equipment lease until a contract is signed – so the asset and the income arrive together.
- Sequencing funding tranches around known cycles or business models – rather than relying on larger, static loans.
In these cases, business leaders don’t just think in terms of capital needs. They align those needs to the rhythm of their business using tools such as:
- Rolling cash forecasts, updated monthly or biweekly, to show pressure points early, before they turn urgent.
- Capital triggers, based on contracts, revenue thresholds, or order volume, that tell the financial team when it’s time to activate funding, not just hope it’s there.
Tuning for the crescendo
For many growing companies, growth doesn’t arrive with notice. It surges, like a crescendo. For success to manifest, what matters is that the instruments, the internal team, the partners, and the capital layers are all in tune before the moment arrives.
In the commercial printing industry, growth occurs through acquisition. When a competitor folds or a book of clients becomes available, a printer must move quickly to close the deal, and the integration that follows must be seamless and immediate. The new customer backlog can’t wait.
American Print Shop* is a national commercial printing company with clients ranging from Macy’s to the U.S. Government. Their M&A opportunities typically appear suddenly and require immediate funding. Some deals are asset-light, making traditional financing structures harder to deploy. Other transactions need a capital buffer to maintain existing vendor relationships and fulfill client orders during the transition. American Print requires creative funding partners that are available when needed and fit into an existing senior capital arrangement.
With over $1 billion in revenue across multiple subsidiaries, American Print has substantial scale. Furthermore, the company isn’t undercapitalized. Its two operating companies each have senior lending facilities in place totaling $70 million. Their tension isn’t about access; in this case, they needed a layer of capital that addressed specific acquisition issues not covered by other funds, allowing them to move forward on deals with confidence.
Our advisors took the necessary time to work with American Print on their unique challenges. The opportunity meant working across multiple entities, clearing legal covenants, and aligning the funding structure to both urgency and complexity.
Over the course of four months, they collaborated with the company to structure $8 million in subordinated capital that aligned with the existing senior lines of credit. This new capital would cover immediate liquidity for acquisitions, support materials purchasing for asset-light subsidiaries, and create space for high-speed integrations without disrupting existing debt structures.
In the end, our advisors delivered creativity and capital design with intent. American Print Shop didn’t just need more capital. It needed to be ready to execute their strategy when the next opportunity appeared.
Readiness isn’t just having capital on hand. It’s about tuning capital to align with your needs.
*Client’s name withheld by request.
Tension two: Flexibility and fit
A trumpet doesn’t play every part of a symphony. Different instruments bring distinct tones, textures, and purposes. The wrong one, even played skillfully, can throw the whole piece off.
Similarly, the best capital optimization strategy strikes a balance between flexibility and fit, adapting to changing conditions and aligning funding structures with the work they support.
When capital doesn’t align with your business operations, it causes friction instead of flexibility, even if it’s quick and inexpensive. You end up pushing capital into roles it wasn’t designed to fill.
Capital that fits on paper but comes with rigidity, like fixed draw timelines or restrictive covenants, can limit your ability to respond when priorities shift or delays hit. What works at closing might not work six months later.
- Flexibility without fit creates noise.
- Fit without flexibility breaks the tempo.
Capital sequenced to secure the perfect asset
Sometimes growth requires a change of key, a shift in tempo, or even a brand-new song. That’s what a premium food supply business could craft when it found a rare acquisition opportunity with a catch.
In early December, two founders in the premium food supply industry were approached with what appeared to be a perfect opportunity. A fully equipped, strategically located, and operationally ready food processing plant had just been made available for purchase. The asset was an ideal fit for their business model. Additionally, at $26 million, the property was priced well below its $40 million market value, but there was a catch: close by New Year’s Eve or lose the deal.
The year-end holidays are stressful enough without trying to chase the deal of a lifetime. Closing in less than a month seemed impossible. To make it happen, the founders needed significant new outside capital quickly. Equity investors were not an option because they didn’t want to give up ownership. This meant finding a debt capital solution that fit their resources and could be approved and funded in just a few weeks — a feat they weren’t sure was possible.
Our advisors assured them it was. Rapid execution of short-term capital is the hallmark of National Business Capital.
The partners had a solid plan, a clear timeline for growth, and a thorough understanding of how the acquisition would unlock new opportunities. The business could access $16 million in funds through existing lines and internal sources, but $10 million stood in the way of a complete transformation of their business.
Our advisors collaborated with the owners to implement a funding solution that enables them to close. With the combination of a strong business plan, expected post-transaction growth, and existing capital, they could access a $10 million short-term bridge loan that would be funded before the year-end deadline.
The deal closed. No control was lost. The transaction met the immediate need while preserving long-term flexibility. In the coming year, the business would refinance its debt as the new asset was successfully incorporated into its operations.
Their business scaled, and their strategy stayed intact. This was a well-sequenced deployment of capital, designed to move at the speed of opportunity, transform the company, and then fold out of the way.
The right capital doesn’t just fund the work. It can change the song.
Tension three: Preparation and calibration
In an orchestra, learning the notes of the score is preparation. The conductor calibrates during the performance. Adjusting in real time, speeding up the tempo, or softening the volume, without abandoning the plan, but allowing the piece to breathe, addressing different parts of the orchestra with distinct gestures, yet with a singular goal: the beautiful expression of the overall musical score.
Planning matters. But over-planning locks you in. In business, being locked in can be just as dangerous as being unprepared. This tension isn’t about choosing between preparation and calibration. You need both, but they serve different purposes.
Preparation sets direction. It puts the fundamentals in place. Calibration keeps you responsive, tuning the plan to the pace and pressures of what’s unfolding. Smart capital strategies aren’t designed along locked-in paths. They can bend and flex along the contours of the company’s strategy.Armstrong Enterprises exemplifies this mindset. Each decision they made was part of a larger strategy. Each use of capital was tied to a clear need. They didn’t overprepare—they stayed aligned. That’s the heart of calibration: using your plan as a compass, not a cage.
Quiet growth with patient capital
Businesses, like symphonies, can build slowly in measured, layered, and precise ways. Patience is required and, ultimately, rewarded. As Armstrong Enterprises grew its business from renting to owning its assets, it chose a similar, disciplined path.
Most people don’t think about the waste generated at a construction site. Whether from demolition or excess unusable material, the garbage needs to be removed. Armstrong Enterprises, however, gave considerable thought to this need. The business provides trash removal for large construction projects, from residential apartments to infrastructure, like highways.
The company’s founder also thought a lot about growth. Initially, Armstrong rented dumpsters from third parties to deliver its service, but the rented asset business model limited profit margins and new opportunities. To grow faster, Armstrong needed to own the value chain.
Throughout a multi-year relationship, the company built a strong relationship with our advisors. National Business Capital structured multiple short-term cash-flow funding tranches—each one calibrated to fit Armstrong’s operational rhythm and repayment style. The capital was designed to match the evolution of the strategy.
Deploying capital smartly, each round of funding helped Armstrong acquire multiple dumpsters. The company quickly reduced its dependence on third-party assets and expanded the business by taking structured leaps. No oversized loans. Just practical funding amounts tapped in time with its ROI window to support each leap forward.
The business took only the capital it needed and followed through as planned. Its consistency paid off. Today, Armstrong owns all the assets it previously rented. Revenue has doubled, and the business continues to grow—not by throwing caution to the wind, but by aligning capital with the work the strategy calls for. The founder didn’t overextend and didn’t overreact.
They move only when it’s time—and it’s always time when they move, says Armstrong’s advisor. By adhering to a disciplined strategy, the company grew one leap, one movement, at a time, like a masterful symphony.
Every business, regardless of industry or scale, must navigate the same underlying tensions in its capital stack. Whether growth is steady and planned or urgent and situational, the challenge remains: how to structure capital that supports the strategy, without getting ahead of it or falling behind.
That tension manifested differently for another business leader, this time in education, where the stakes were urgent and the path required just as much calibration.
A capital stack is not “one-size fits all”
Sometimes a client works with National Business Capital because their financing plan is a bit off-key. In this case, meeting long-term goals required some tuning to align with the school’s short-term needs.
Schools operate on strict schedules. There isn’t a “soft open.” When the school year starts in the fall, it must be ready.
As the summer neared its end, a private school for children with autism prepared to open its new facility in a region with limited special education options. Timing was now critical. Their new location needed to be operational in only a couple of months.
Initially, the school thought a government-backed SBA loan would be the best approach. They wanted long-term financing to support their comprehensive expansion goals and the merger of two campuses. However, as the school walked with our advisors through the SBA application process, it became clear that an SBA loan timeline, with a multi-week approval process and lengthy waiting time to receive the funds, meant that the funding wouldn’t arrive fast enough to meet their deadlines.
Our advisors suggested the school pivot its capital plan. Instead of looking at the long-term first and forcing the wrong instrument to fit into their stack, they advised using a short-term, faster funding cash-flow supported loan of $600,000 to meet the school’s immediate transition and construction costs. Simultaneously, the advisory team began working with them to secure an SBA loan, addressing the larger, longer-term need.
The school needed a functional capital stack, an orchestrated collection of financial instruments that leveraged each one’s strengths in a manner that aligned with the school’s operational rhythm, rather than relying on a single loan product.
Fast money when speed matters. Long-term financing for permanence.
The capital stack as a creative act
No business operates exactly as planned. Growth doesn’t follow a set script. Markets change. Margins narrow. Opportunities appear early—or sometimes not at all.
Capital, if it’s going to be useful, must be flexible. That means more than accessing it when you need it. Calibration requires structure, timing, and control.
A capital stack should not only fund your business, it should also mirror it. Capital needs to adapt as the company grows, tightens, and stretches. It needs to be tuned.
Ask yourself:
- Where in your stack are you overcommitted—or under-supported?
- What tools are present but poorly timed?
- What’s in your stack because it was available, not because it was right?
The purpose of capital is not to cover every risk. Capital should be calibrated with your strategy, so you know when to proceed, when to pause, and when to hold your ground.
That calibration takes creativity. Not just in finding capital, but in shaping it—layering tools, sequencing timing, and composing a structure that aligns with your business.
Don’t settle simply for more funding. Design better-matched capital—capital that belongs at each stage, in each shift, and in time with the rhythm of your decisions.
Treat capital as part of your strategy’s overall composition. Something tuned. Something composed. Something living. Let it be orchestrated.
Explore your capital options today.
ABOUT THE AUTHOR
Phil Fernandes serves as Chief Operating Officer for National Business Capital. He boasts 15 years of experience in sales and 10+ years of management experience as National’s VP of Financing/Analytics. Phil is also an excellent writer who's completed the Applied Business Analytics executive program at MIT and regularly contributes articles to National Business Capital’s blog.
