Capital Structure Optimization: Financing Growth Without Surrendering the Company

There is a decision Damon Boswell and Ashley Boswell watch founders agonize over more than any other, and it is rarely the decision they think they are making. The founder believes the question is how much money to raise. The real question is what kind of money to raise — debt, preferred equity, or common equity — because each instrument carries a different cost, a different control consequence, and a different claim on the future value of the business. Get the mix wrong and the company funds its growth by trading away the very upside the growth was meant to create. Get it right and the same expansion funds itself while the founder keeps the keys. That discipline — capital structure optimization — is the one Damon and Ashley treat as the load-bearing wall of every growth plan, because every other decision rests on it.

The 2026 capital markets make the stakes sharper than they have been in years. Interest rates have stabilized but remain structurally higher than the decade that preceded them, with the benchmark SOFR sitting near four and a half percent in the second quarter of 2026, down from its 2023 peak but still a world away from the zero-rate environment founders grew up in. Senior debt for mid-market deals now prices at SOFR plus four to six hundred basis points, meaning all-in senior rates of roughly eight and a half to ten and a half percent. Meanwhile private credit dry powder has reached roughly one point seven trillion dollars globally, with hundreds of billions allocated to the structured equity and junior capital strategies that sit between traditional debt and common equity. The instruments exist. The discipline to choose among them is what most founders lack, and that gap is where Damon and Ashley do their most consequential work.

The Capital Stack Is a Sequence, Not a Menu

Damon Boswell is precise about the framing, because founders who treat financing as a menu pick the wrong instrument for the wrong reason. The capital stack is a sequence, and the order in which you draw from it determines the cost and the control you live with for years. The lowest-cost, lowest-control-loss layer is senior debt, which in the current market lenders cap at roughly three and a half to four and a half times EBITDA for mid-market companies. Above that sits preferred equity — an instrument that carries an eight to fourteen percent coupon but preserves voting control and avoids the covenant traps of a heavily leveraged balance sheet. At the top sits common equity, the most expensive capital a company can raise, because it is permanent and it dilutes ownership of every dollar of future value the business generates.

Ashley Boswell draws the distinction founders most often miss. Senior debt is the cheapest layer because it is the safest layer for the lender — it sits first in the capital stack, gets paid first in a downside scenario, and carries covenants that protect that priority. Common equity is the most expensive layer because it sits last, absorbs the first losses, and demands a return commensurate with that risk. Preferred equity lives between them, and its rise in 2026 is a direct consequence of the math: when senior debt caps at four and a half turns and a growth acquisition prices at seven to nine times EBITDA, the gap between what senior debt will fund and what the deal requires is exactly the gap preferred equity was designed to fill. Issuance of preferred equity for non-sponsored mid-market deals rose roughly thirty-four percent year over year in 2025, and the trend has continued into 2026 for a simple reason — it solves the structural problem the other two instruments cannot.

• Senior debt: lowest cost, first in the stack, but capped at roughly 3.5x to 4.5x EBITDA and constrained by covenants that protect the lender's priority
• Preferred equity: 8 to 14 percent coupon, sits above senior debt, preserves voting control, and fills the gap between senior capacity and deal value
• Common equity: the most expensive capital, permanent dilution, last in the stack — raise it only when the valuation step-up justifies the ownership surrendered
• The sequence matters: draw senior debt first, preferred equity to fill the gap, and common equity last, because the order determines the cost and control you inherit

The Stage Determines the Stack

Damon Boswell maps the stack to the company's stage, because an instrument that is optimal at one scale is inaccessible or destructive at another. A company below three million in EBITDA generally cannot access institutional preferred equity at all — the check sizes are too large for the provider universe, and the company is better served by founder equity, senior debt where available, SBA facilities, and friends-and-family capital. Between three and ten million in EBITDA, the door to institutional preferred opens, with checks starting around five to ten million from family offices and business development companies. Between ten and twenty-five million in EBITDA, the full multi-instrument stack becomes available — senior debt at four to four and a half turns, preferred equity at one and a half to two and a half turns, and common equity only when further growth demands it. Above twenty-five million, the company accesses broadly syndicated markets, high-yield bonds, and larger institutional checks, with preferred remaining useful as a covenant-friendly layer above senior and below common.

Ashley frames the staging as a discipline of matching the instrument to the company's cash flow reality rather than to the founder's ambition. A company with inconsistent cash flow cannot service an eight to fourteen percent preferred coupon regardless of how attractive the growth story is, and forcing the structure onto a business that cannot carry it converts a growth instrument into a distress trigger. The diagnostic always precedes the structure, and the diagnostic is built on the cash-flow durability that determines which layers the company can actually support.

The cheapest capital is the capital you do not raise. The second cheapest is the capital that does not own your future. Sequence the stack accordingly. — Damon Boswell

The Control Question Nobody Asks Early Enough

Ashley Boswell returns repeatedly to the control dimension, because it is the one founders underestimate until it is too late. Common equity is not merely expensive — it is permanent, and it comes with governance. A common equity partner takes a board seat, a say in the exit timing, and a claim on every dollar of value the business generates from the day the check clears forward. Preferred equity, by contrast, is structured to preserve voting control: the founder keeps the operating authority, keeps the exit decision, and redeems the preferred at a defined event — a sale, a refinancing, a recapitalization — rather than carrying a permanent partner. For the founder who wants to fund a thirty million dollar expansion without inviting a partner to set the exit clock, preferred equity at a twelve percent all-in coupon is often the precise instrument the situation calls for.

The control question connects directly to the firm's broader governance work, because the capital structure and the governance structure are two expressions of the same underlying decision: who holds authority over the company's future. A founder who raises common equity to fund growth has, whether they framed it this way or not, shared authority over the exit. A founder who layers preferred equity above senior debt has funded the same growth while retaining the authority to decide when and whether to sell. Damon and Ashley treat the two decisions as inseparable, because the companies that optimize them in isolation routinely fund their growth with one hand and surrender the right to benefit from it with the other.

The Timing Discipline That Determines the Terms

Damon Boswell is blunt about the timing error that costs founders the most. A rushed process gets worse terms — always. The founder who waits until the capital is needed has surrendered every piece of leverage they held, because a lender or investor who knows the company has a deadline prices the urgency into the terms. The discipline is to raise before you need it, which sounds counterintuitive to founders trained to conserve dilution and minimize interest, but which is the single highest-return timing decision in capital strategy. The company that raises preferred equity from a position of strength negotiates a coupon one to two hundred basis points lower and equity participation fifteen to twenty-five percentage points more favorable than the company that raises the same instrument from a position of necessity.

Ashley pairs the timing discipline with a second rule that the 2026 market makes non-negotiable: match the redemption schedule to a realistic event. Preferred equity is a bridge, not a permanent capital structure, and it is designed to be redeemed — at a sale, a refinancing, or a recapitalization — at a multiple of the original invested capital. A redemption schedule that assumes an exit in eighteen months when the realistic horizon is thirty-six converts the instrument into a distressed-sale trigger, because the preferred comes due before the value creation that was supposed to pay it off has materialized. The founders who structure the redemption against a realistic timeline are the ones who redeem on their terms. The ones who structure it against an optimistic timeline are the ones who redeem on the provider's terms, and the difference is measured in millions of dollars of enterprise value.

The Covenant Trap

Damon Boswell draws particular attention to the dimension the research flags and that mid-market founders most often discover only after the ink is dry: covenants. Senior debt is cheap precisely because it is protected by covenants — financial maintenance tests the company must satisfy every quarter, restrictions on additional indebtedness, and limitations on distributions to owners. A company that maxes out senior debt to capture the lowest cost layer has, in the same stroke, constrained its flexibility to respond to a downturn, to raise additional capital, or to distribute cash to the founders who own the business. Preferred equity, by contrast, is typically covenant-light relative to senior debt, which is precisely why sophisticated operators use it to preserve senior debt covenant headroom — keeping the cheapest layer available for the next opportunity rather than exhausting it on the current one.

The trap is structural, and Ashley has watched it convert growth into distress more than once. The founder who layers senior debt to the cap to fund an acquisition discovers, when the next acquisition opportunity appears, that the covenants on the existing senior facility prevent the additional leverage the new deal requires. The company that had access to the cheapest capital has, by using all of it, lost access to any of it. The discipline is to reserve senior capacity — to fund the current growth with a mix that leaves headroom for the next — because the company that preserves its senior covenant headroom preserves its optionality, and optionality is the most undervalued asset on a mid-market balance sheet.

From a Capital Stack to a Capital Strategy

Ashley Boswell frames the endpoint, because a stack that is merely assembled is a financing event, while a stack that is sequenced, timed, and matched to the company's cash-flow reality is a capital strategy. The companies that operate at that level treat capital structure the way they treat operations — as a designed system with named owners, a review cadence, and a set of principles that govern every financing decision. When the next opportunity appears, the question is not whether the company can raise the capital. It is which layer of the stack the opportunity calls for, whether the covenants permit it, and whether the redemption timeline aligns with the value creation the capital is meant to fund. The founders who can answer those questions are the ones who fund growth on their terms. The ones who cannot are the ones who fund growth on whoever's terms are available when the need arrives.

The discipline compounds the way every discipline at Empowerment Blueprint LLC compounds. A well-sequenced capital stack preserves optionality, and optionality preserves control, and control preserves the upside the growth was meant to create. The companies that build the discipline fund expansion after expansion while the founder keeps the keys. The companies that skip it fund the first expansion by trading away the right to benefit from the second, and the difference is the difference between a company that scales and a company that merely gets larger on someone else's terms.

The Founder's First Question

Damon Boswell reduces the entire discipline to a question he asks founders in the first conversation: if the right opportunity appeared tomorrow and required twenty million dollars of capital, do you know which layer of your stack it would come from, what it would cost, and what it would cost you in control? The founders who can answer are already operating with the discipline. The founders who cannot are operating with a capital structure that accreted rather than was designed, and the gap between the two is where the next round of growth will either compound the company's value or quietly surrender it. Capital structure is not a financing decision. It is a strategy decision, and it is the one that determines whether the founder owns the outcome of the growth they fund.

If you are approaching a growth initiative, an acquisition, or a liquidity event and you have not mapped which layer of the capital stack the opportunity calls for, the cost of the ambiguity is measured in basis points and ownership points you will never recover. Damon Boswell and Ashley Boswell can help you design a capital structure that funds the growth without surrendering the company, starting with a confidential assessment of your current stack, the covenant headroom you hold, and the sequencing that would preserve your control through the next stage of expansion.