There continues to be plenty of growth capital available for established data center services providers, with more and more debt and private equity players wanting to get a piece of the action. As the market expands, it also employs a wider variety of financing tools.

“There’s a lot of folks that would like to get a platform in this business and grow,” Robert Marcotte, executive VP and managing director of MCG Capital Corp., said during a panel on data center finance at the DatacenterDynamics conference in San Francisco Tuesday.

MCG provides growth capital for small and mid-size companies, currently representing more than US$6bn in investments total.

The company has to have a clear record of growth, however. “They’re looking for something that can absolutely grow … and for a significant amount of time,” Marcotte said.

The finance picture is not as flowery for smaller players. As smaller-size lenders continue to have capital-availability issues, it is hard for smaller businesses gain access to new capital.

Deutsche Bank, for example, will not finance a data center deal that is less than $50m in size, Baxter Wasson, director of credit structuring at Deutsche Bank, who also sat on the panel, said. Rarely, the bank will lower the threshold to about $25m, but the deal has to be exceptional, he said.

As they understand the data center business better, investors do not mind large upfront capital expenditures. Once they take on a data center provider, they push for aggressive growth, which requires a lot of money upfront.

“Equities are so geared toward growing the business they don’t want to overleverage it,” he added. They assume capital expenditures will be huge upfront and try not to do anything to obstruct growth.

The way data center companies grow has also changed.

Growth in the past meant building out new facilities, Marcotte explained. Today, you see more companies expand by acquiring other existing operators in new regions they want to enter.

“It doesn’t mean that they aren’t building new capacities in those markets, but it tends to be a more conservative approach.”

The US data center industry saw a major spike in debt and equity capital flowing in during the first half of 2012, following what one investment banker told us was a breakout year for data centers as an asset class.

Lenders and private-equity players have more confidence in the space after it has shown healthy growth rates through the economic recession. James Henry, senior managing director at the investment-banking firm Bank Street Group told us in March that acquisitions of data center service providers

The first half of 2012 saw a lot of capital raised by data center providers. A range of types of providers got access to new capital.

Examples include Vantage (US$135m), Ascent ($107m), DuPont Fabros ($125m), Telx ($75m), RagingWire ($140m) and QTS ($270m). Interconnection and data center services provider Zayo announced $3.34bn in private equity in July, when it also announced the completion of its purchase of competitor AboveNet.