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Archive for the ‘Medium Business Financing’


Pitching Your Business to Different Audiences 0

Posted on March 24, 2015 by Tiffany C. Wright
Business people presenting

Your presentation may be formal or informal, depending on your audience.

Pitching to different groups requires a different focus.

Pitching to different groups (potential investors, interested buyers, or prospective customers) requires similar skills. However, the actual pitch requires a completely different focus and packaging. Sometimes it’s difficult for me to convey this difference to business owners who are consummate sales people. These sales-savvy owners insist they know what they’re doing and don’t need input on crafting an investor pitch, although they’ve never done one before. Then they pitch and do not get the feedback they anticipated. I do say, “I told you so!”, then I have them accompany me to an angel group presentation or to a venture conference.

Pitching to investors and prospective buyers is similar but different.

Pitching to investors and prospective buyers are the most similar. However, with investors, the focus is on what can your business do for them in the next 3-5 years and how you are positioned to do this. However, the focus for prospective buyers is on what have you done/accomplished in the past 2-3 years and how does that translate into the business being valuable enough without you to pay your price.

Steve Carrell in The Office

Who is driving your business matters to both investors and buyers.

Both are interested in the management team.

Both investors and buyers are keenly interested in the management team; for investors, this includes you and any co-founders / co-owners. Both investors and buyers believe a great management team can take a ho-hum company and really make it valuable and that a mediocre management team can run a great company into the ground.

But differences remain.

For an investor, you and your team are the ones that will execute the strategy to achieve the company’s goals, which will drive the investor’s exit and the sought after return the investor seeks. In contrast, a buyer is betting on her ability or her team’s ability to execute. A buyer is also concerned that there is sufficient infrastructure to support that execution; that “infrastructure” includes any senior management who remains with the company after you sell it.

Overview

Remember. The focus for investors is on the following: management team, size of the market opportunity (i.e., Is the opportunity sufficiently large for the company to grow and produce the investor’s expected ROI?), accomplishments to date (i.e., proof of the ability to execute), and exit strategy (i.e., How will you monetize the investor’s return so he can extract it from the company?). The focus for buyers is on the following: non-ownership management team, market opportunity, past performance (revenue, profits, cash flow), and existing infrastructure.

 

Small Businesses Continue to Obtain Business Funding 0

Posted on August 21, 2014 by Tiffany C. Wright

The Funding Is Out There! book coverAtlanta, GA — (ReleaseWire) — 08/20/2014 — If you tune in to the pundits and news reports, small businesses continue to have a difficult time obtaining business funding due to the contraction that occurred in the banking industry as a result of the financial crisis in 2008 / 2009 and the ensuing credit tightening.

“Lack of capital is never the real, root issue, although it continues to be a bigger issue than before the recession hit. Small businesses can obtain capital in 2014. However, the primary issue is lack of knowledge of the different types of funding and financing and how to access that capital. In addition, the younger the business, the fewer the funding sources,” says Tiffany C. Wright, author of the new eBook The Funding Is Out There! Access the Cash You Need to Impact Your Business. “Unfortunately, most small and medium business owners and managers are wholly unaware of the variety of funding sources that exist for their business type. If they are somewhat aware, then they are highly unprepared to meet the funding requirements from both a relationship and financial packaging perspective.”

Wright asserts that there are always several business funding alternatives available for any small business. To access these sources, entrepreneurs and business owners must educate themselves and think creatively. “Most business owners think of bank financing when they hear ‘debt’ and venture capital when they hear ‘equity’. While these two sources provide a significant amount of small business funding, there is a vast pool of available capital from other funding entities that provide working capital and growth capital. Small and medium businesses can even tap into financing that looks somewhat like debt and somewhat like equity.”

The Funding Is Out There! Access the Cash You Need to Impact Your Business has over 30 in-depth yet succinct case study examples of what other real business owners have done to raise capital to grow their businesses. The material covers not just what is available but the how to obtain it – websites, templates, what works best and why for a particular business type. It includes everything from pursuing business-friendly community banks to forming strategic alliances to tapping supplier financing. This eBook shows business owners how to raise the capital they need to move out of survival mode and grow their business. The Funding Is Out There! helps business owners lay the financial framework to create a viable, sustainable business to sell or pass on.

According to the U.S. Census Bureau, as of 2011, there were nearly 5.7 Million firms with employees in the U.S. 3.5 Million firms had 1-4 employees and another approximately 1.0 Million firms had 5-9 employees. Only 81,243 companies had 100 – 499 employees and even fewer, 17,671, had 500 or more employees. Therefore, small businesses have a huge impact on the economy. Wright says, “We must strengthen more small businesses into larger, more viable, and more financially stable firms. By doing this we ensure the continued strengthening of the American economy.”

The Funding Is Out There! Access the Cash You Need to Impact Your Business can be ordered from Amazon, online at http://www.amazon.com/Funding-Out-There-Access-Business-ebook/dp/B00JW3FYGG/ref=sr_1_1?s=books&ie=UTF8&qid=1400191594&sr=1-1. The price is $9.99. For more details visit http://www.thefundingisoutthere.com.

Compound Interest Advantages 0

Posted on September 13, 2013 by Tiffany C. Wright
Compounding interest grows your company accounts faster.

Compounding interest grows your company accounts faster.

Your company may use savings accounts and money market accounts to hold extra cash for short or long periods of time. Using compounded interest can help you maximize the funds held in these accounts and optimize the benefits of those funds. Compounding involves the gradual growth in the level of interest you earn on your company’s account each month or year. This compounding provides your business with significant advantages.

Compound Interest Defined

Compound interest occurs when you accrue interest on your principal amount then interest accrues on that principal plus interest. Put another way, a financial institution pays interest to your company on both your business’ original investment and on any interest it earned. Interest may compound annually on long-term accounts or it may compound monthly or daily. A higher compounding frequency increases the growth rate of your business’ account balance.

Faster Wealth Accrual

If you invest your business’ money in an interest-bearing account providing compound interest, you will achieve your company’s investment goals faster. The account balance grows faster due to the compounding. For example, your company deposits $10,000 in a six month certificate of deposit. If the five percent interest compounds semi-annually, the six month ending account balance grows to $10,500. With compound interest calculated daily, the six month ending balance grows to $10,513.

Greater Returns Over Time

Interest compounding benefits increase with time. As the interest earnings accrue on your company’s account, the “principal” amount grows by the amount of compounded interest. When you make no withdrawals and leave the principal and interest accruing balance untouched for a period of several years, the gains can be significant. For example, the $10,000 that grew to $10,513 at the end of six months of daily compounding would grow to $12,840 after five years.

Use

To derive the most benefits from compounding, you can seek out accounts that offer daily compounding instead of monthly or annual compounding. These accounts include savings, money markets or certificates of deposit. If your company purchases bonds as a means to deploy excess cash, only select those bonds that offer more frequent compounding. If you offer customers longer-term financing via promissory notes with six month or one year terms, you can charge compounded interest. If you offer terms to supplier and charge a late fee, for example, 1.5 percent per month, you can modify the terms to state “compounded daily” to increase your return on the late fees.

 

References

External Financing Alternatives – Examples 0

Posted on September 11, 2013 by Tiffany C. Wright
You can leverage limited resources by thinking creatively and bootstrapping.

You can leverage  resources by thinking comprehensively about your funding options.

Businesses need money to run and expand operations. Companies must pay rent, hire employees and purchase assets. New or growing businesses often do not generate sufficient cash from operations to fund operations and growth and therefore, must access external financing. Companies have a range of equity and debt financing alternatives to obtain this cash.

Credit Lines and Cards

Companies use credit lines to fund day-to-day operations including paying suppliers, meeting payroll and providing cash for near-term anticipated needs. Banks typically provide lines of credit but accounts receivable financing entities or inventory financing vendors can also provide these credit lines. Most credit lines have variable interest rates and one-year terms that renew annually. Companies use credit cards to pay for office supplies, maintenance items and miscellaneous purchases. However, some vendors allow customers to pay with a credit card essentially making the credit card a procurement card. Most credit cards allow cash advances which can be used as a short-term credit line.

Vendor and Equipment Financing

Companies that have a strong relationship with their vendors can obtain financing from them. Companies can complete a credit application with a vendor then build their credit with that supplier to move from paying in advance to paying within 15 day to potentially paying in 60 days. Some suppliers will provide interest-bearing financing for six to twelve months on large purchases to key customers. To facilitate sales and leases, equipment vendors often offer direct financing or have a relationship with a third party to offer indirect financing. Equipment financing may have a term of six months to three or five years depending on the equipment’s value and useful life.

Term Loans and Mortgages

Term loans can be short-term but are typically three to seven years in length. Companies may use term loans to finance medium-term working capital needs. More often companies use term loans to purchase assets; install infrastructure –for example, information technology systems; or fund marketing and hiring plans. Banks and commercial lending companies make term loans. A related financing source is mortgages. Mortgages are term loans tied to a specific property acquisition. Mortgages have longer terms that usually range from ten to twenty years for commercial property.

Common Shares or Interests

Instead of debt financing, companies can also issue equity. A sole proprietorship cannot issue equity but a sole proprietor can bring in a partner to form a partnership, each with an appropriate partnership interest. Corporations can issue common stock and limited liability companies can increase the number of membership interests. Companies can issue shares or interests to friends and family or they can obtain investment from accredited investors. An individual accredited investor must have a personal liquid net worth of $1 million– excluding her personal residence– or an annual income of $250,000.

 

References

Team Ivy Business: Small Business Access to Capital 0

Posted on March 13, 2012 by Tiffany C. Wright

Bill Holt, Suntrust’s EVP Business Banking

The Climate for Small Business Capital in 2012

Click here to register!

Small Business Access to Capital
  1. Small Business access to capital in the current economic environment.
  2. What small businesses need to do to raise capital in the current environment
  3. Small business outlook for 2012 – 2014.

Bill Holt

Executive Vice President, Business Banking

SunTrust Banks, Inc.

Bill Holt joined Suntrust Bank in July 2009 as Executive Vice President Business Banking.

Bill’s prior experience includes Executive Vice President Wholesale Banking with Wachovia Bank, Executive Vice President – Wholesale Banking Group Chief Operating Officer and Executive Vice President – Executive Director of Business and Community Banking.

Bill Holt graduated from Furman University in Greenville, South Carolina with a Bachelor of Arts, Economics and Business Administration.

Asset Based Lending as a Financing Tool 0

Posted on February 10, 2012 by Tiffany C. Wright

Great article on asset based lending – what it is and when to use it! – TW

 

Asset Based Lending as a Financing Tool

By Kent Harlan

Many CFOs and other finance executives view asset based lending as a financing outlet of last resort. While that may sometimes be the case, such a view is a one-dimensional perspective. But as companies confront a tight credit market coupled with lower than expected results, many CFOs are viewing asset based lending as a viable option in the financing tool kit. Even successful companies with strong banking relationships can quickly fall out of favor with lenders and lose access to unsecured financing, especially if they’ve shown recent losses. A few bad quarterly results doesn’t necessarily mean that a company is in bad shape, but stringent bank underwriting parameters can cause existing loans to be called and prevent the firm from qualifying for new financing. A company facing such a scenario can use asset based lending (ABL) arrangements as bridge loans to pay off banks and provide liquidity until bank financing is achievable.

What is asset based lending?

 

Asset based lending can be an effective way to raise capital.

An asset-based loan is secured by a company’s accounts receivable, inventory, equipment, and/or real estate, whereby the lender takes a first priority security interest in those assets financed. Asset-based loans are an alternative to traditional bank lending because they serve borrowers with risk characteristics typically outside a bank’s comfort level. These assets typically have an easily determined value. The financing can take the form of loans to revolving credit lines to equipment leases and can range from $100,000 to $1 billion, depending on needs and circumstances.

How can ABL be a beneficial financing option?

Acquisition

To grow a business, a company may look to acquire a strategic partner or even a competitor. Asset-based financing is often an efficient means to obtain funding for business acquisitions.

Turnaround Financing

Turnaround financing is often used by under-performing businesses that are not achieving their full potential. In some cases, it is used for businesses that are either insolvent or on their way to becoming insolvent. Asset-based lenders are accustomed to the bankruptcy process and asset-based financing is ideal for turnarounds because of its flexibility.

Capital Expenditures

Capital expenditure is the money spent to acquire and/or upgrade physical assets such as buildings and machinery. Capital expenditure is also commonly referred to as capital spending or capital expense.

Debtor-in-Possession (DIP) Financing

Debtor-in-possession (DIP) refers to a company that has filed for protection under Chapter XI of the Federal Bankruptcy Code and has been permitted by the bankruptcy court to continue its operations to effect a formal reorganization. A DIP company can still obtain loans–but only with bankruptcy court approval. DIP financing, which is new debt obtained by a firm during the Chapter XI bankruptcy process, allows the company to continue to operate during a reorganization process. Asset-based lenders also provide exit financing or confirmation financing to companies coming out of bankruptcy.

Growth

Typically, as a company grows so does its need for financing. Also, as a company’s collateral grows, its assets can strengthen its ability to borrow. An experienced and creative asset-based lender can assemble a credit facility that can scale to grow with a company.

Recapitalization

Recapitalization is the process of fundamentally revising a company’s capital structure. A company might recapitalize due to bankruptcy or replacing debt securities with equity in order to reduce the company’s ongoing interest obligation. A leveraged recapitalization typically achieves just the opposite–by taking on a material amount of debt, the company increases its ongoing interest obligation but is able to pay its shareholders a special dividend.

Refinancing/Restructuring

When a company enters or exits a growth stage, refinancing or restructured financing may be key to creating a capital structure that better meets the needs of the company. This type of financing is often used for market expansion, completing an acquisition, restructuring operations, or following a successful corporate turnaround.

Buyout

A buyout is the purchase of a controlling percentage of a company’s stock. In a leveraged buyout (LBO), the acquiring company uses the minimum amount of equity to purchase the target company. The target company’s assets are used as collateral for debt, and its cash flow is used to retire debt accrued by the buyer to acquire the company. A management buyout (MBO) is an LBO led by the existing management of a company.

What are the advantages to ABL?

· Tends to feature fewer covenants than other types of financing and those it does include tend to be more flexible. Cash flow loans, by contrast, often have four or five covenants including total leverage, fixed charge coverage, and minimum net worth.

· If a company is growing, the receivables and inventory it uses to secure the asset based loan is likely growing as well. Thus, the company has a greater collateral base and can borrow funds to fuel its growth.

· ABL instills discipline. Since the loans are based upon accounts receivable and inventory, the company is motivated to improve collections and complete the production cycle in a timely manner.

· As mentioned earlier, ABL imposes less stringent covenants compared to cash flow loans. These type of loans also provide better security to the lenders, which in turn allows them to grant more time to the borrowers to turn their company around in difficult times.

What are the disadvantages of ABL?

· Since the level of funding is contingent upon the asset values on the balance sheet, there may not be sufficient liquidity. Only asset rich companies would likely benefit, while many service companies would not.

· Such a requirement can be difficult for the company.

· Asset based lending tends to be more expensive than other types of financing, often three to five percentage points above traditional bank financing.

· ABL runs counter to the thinking of a lot of CFOs who believe it is dangerous to tie short term assets to long term financing.

Although ABL is now a common financing tool, it is not for everyone. It makes sense to explore all types of financing before deciding if asset based lending is the right choice. The CFO must review the state of the company’s credit, analyze the firm’s asset structure, and its current debt load. Asset based lending can provide the liquidity needed for the company to grow until less expensive bank financing is available.

Kent Harlan has been a CPA since 1984 and has provided consulting, accounting and financial services to several industries. He is the owner of Ozarks Capital Funding, LLC, a Springfield, MO based company offering financing in the areas of accounts receivable factoring, equipment leasing, asset based lending, and healthcare provider financing. Website: http://www.ocflink.com

Article Source: http://EzineArticles.com/?expert=Kent_Harlan

http://EzineArticles.com/?Asset-Based-Lending-as-a-Financing-Tool&id=289296

 

 

Private Equity Speaker Panel 0

Posted on January 11, 2012 by Tiffany C. Wright

The Wharton Club of Atlanta,
Kellogg Alumni Club of Atlanta
and the
London Business School Atlanta Alumni Club
are pleased to invite you to our next
breakfast series event entitled

Private Equity Panel Discussion:
Opportunities in 2012


with guest speakers

Andrea Malik Roe
Director, Healthcare
Arcapita

John McCarty
Principal
Peachtree Equity

and moderated by

Kenneth Saffold
Vice President
GE Capital



Thursday, January 26, 2012
7:30 AM – 9:00 AM

at
The Buckhead Club

3344 Peachtree Road NE, Suite 2600
Atlanta, GA  30326

Cost:
$35 per person

Note: If you are a Wharton, Kellogg or London Business School grad and would like to attend, please email me at twright@tocafamilyservices.com. I’ll email you the link to register.

For a complete listing of 2011-12 Breakfast Series events, please visit:
http://wklatlanta.eventbrite.com/

Financial Projection Scenarios- Best Case to Worst Case 0

Posted on May 13, 2011 by Tiffany C. Wright

Q: Should you have several different scenarios when doing financial projections / creating pro-forma financials?

A: Yes, but only if you or someone on your team (whether permanent or contracted) has the skill and acumen to do these correctly. If not, stick to providing one set of financial projections which focus solely on the probable or expected performance. Why? If the financial scenario modeling is done well, the bank or equity investor will use those as their own. If they are not done well, the model will be completely disregarded and your credibility will be undermined and perhaps even damaged.

For those of you who, like myself, are adept at building models and doing iterations of financial projections, banks and equity investors like to see three (3) scenarios: 1) Worst case; 2) Probable case; 3) Best case.

The worst case scenario is NOT when all he– breaks lose. The worst case scenario is the most probable worst case you can think of showing the loss of one or two of your highest revenue-generating customers, a drop off in the economy and/or industry, the rejection of a highly anticipated product or service by the market, or some similar occurrence(s) Running a worst case scenario shows that you’ve thought about how negative situations will adversely impact your company’s sales, profits, and cash flow. Doing this will also help you structure your financing to ensure you do not break a loan covenant.

The probable case is the general financial projections incorporating the assumptions you have in your strategic business plan. 

The best case scenario is when everything goes better than you have in your plan. Your new product or service could be wholly embraced by the market and grow exponentially. You could enter into a partnership that dramatically increases your customer base. Anything that you have reasonably considered that would vault your company’s growth in revenue, net income, or cash flow can be part of the best case. Make sure you specify your assumptions and explain why this scenario is possible.

Financing Medium Sized Businesses: A Slideshare Powerpoint Presentation 0

Posted on May 11, 2011 by Tiffany C. Wright

Financing a Medium Sized Business” is a presentation I created that provides an overview on when to pursue business financing and what types of financing are available. It includes some helpful hints on how to view your business so that you, as a business owner or executive management team member, view your business from the same perspective that the financing or investing entity does. When you can empathize with whomever your pursuing business funding from, you can speak to their issues, concerns, and desires easily.

Financing a Medium Sized Business is hosted on Slideshare. I have other presentations there that you may wish to check out. In the next month I will add a presentation page to this site. Stay tuned.

Also, if you have any topics you’d like me to cover in a presentation or general blogpost, please let me know.

 

Writing a Successful Financing-Focused Executive Summary – Part I 0

Posted on April 11, 2011 by Tiffany C. Wright

Video provides a top-down description of why and how to write an abbreviated business plan or executive summary specifically to obtain bank financing or garner equity investors. This is Part I.

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