the color(s) of money financing growth… without going to the bank
TRANSCRIPT
The Color(s) of Money
Financing Growth… Without Going to the Bank
Today’s Objectives
1. Be the Shark, Not the MarkRules of the Funding Game
2. Solids or StripesThe Colors of Money
3. What’s the WagerHow Use Determines Source
4. Tricky Combo ShotsNon-Bank Options
1. Be the Shark - Not the Mark
The Mark
1. Looks in the Wrong Places
2. Lacks Knowledge of Process
3. No Clear Budget
4. No Business Plan
5. Can’t Possibly Pay it Back
6. Too Early – Risky
7. Too Late – Behind the 8 Ball
The Shark
1. Financial Responsibility– Personal Credit Score– Business Profitability
2. Clear Plan– Use of Funds– Business Model– Payback with Timelines
3. Team– Relevant Industry Experience– Business Sense
Case Study: Shark Tank
• What Caused Them to Compete Over This Deal?
• What Were the Impacts of Each Offer?
• What’s the Relative Valuation?• Which Would You Choose?
SpikeBall
KEVIN• Loan $500k @ 9%• 10% warrant @
$0 cost• $0 valuation
DAMON• $500,000• 20% of business• $2.5 million
valuation
Solids or Stripes:Loan or Equity
Mix & Match Uses to Sources
VENTURECAPITAL
ANGELCAPITAL
LOANS& CREDIT
SELFFINANCE
SAVINGS
Tangible IntangibleIntangible
Cash Credit Equity
Tangible Uses of Funds
Tangible Purchases• Equipment• Real Estate / Office Building• Supplies & Raw Materials• Positive Cash Flow• Receivables• Ongoing Concern
Intangible Uses of Funds
• Take a Salary• Fund On-going Losses• Create a Proof of Concept• File a Patent or Draft Designs• Travel• Marketing / Advertising
What’s the Wager:What You Need Determines
Where You Look
Rule: Match Your Sources &
Uses
• Identify “Use Of Funds”– Set Clear Budgets– Know What Things Cost!
• Forecast Growth & Payback!– Know What “Drives” the Business– Know When You Break Even
What is Breakeven?
• Break Even• Cash Flow Positive• Discounted Cash Flow• Internal Rate of Return (IRR)• Cost of Capital
Features & Benefits
• Interest Rate < Rate of Return• Term Or Tennor < Useful Life • Other Covenants or Terms• People: Can You Live With
Them?
Example: “Build a Distribution Ctr”
USES
Land & Building
Trucks and Equip.
Inventory
New employees
SOURCES
Mortgage (6%)
Vendor Lease (10%)
SBA Loan (12%)
Mezz Loan (18%)
Case Study
Tricky Combos(Non-Bank Funding Sources)
Use What You’ve Got
“The money will come from wherever it is now”
Where it is Now
Purchase
Receive
Assemble
HoldSell
Bill
Deposit
Where it is Now (2)
• Collect Receivables• Hold Payables• Cut Down Inventory• Find Hidden Inventory – Not in
the System / Samples• Sell Equipment• Expired but Sellable products • Discretionary Expenses
Looking Deeper and
Broader
More Skin in the Game
PERSONAL CREDITConvert 401k to Stock
Credit CardsLeveraged Savings
MortgageSecond MortgageThird Mortgage
Life Insurance (Var. Ann.)Margin Accounts (Stocks)Title Loans (at a Bank!)
OPM
FriendsFamily
CustomersVendors
Equip LeasingGovernment: SBIR / OPIC
Private GrantsAffinity Investors
Angel GroupsPEGs
Venture Capital
New & Improved OPM
• KickStarter / Indiegogo• New JOBS Crowdfunding• General Solicitation
Case Study
Combination Shots• Bridge Loans• Venture Loans• Mezzanine Loans• Angel Guaranteed Loans• Convertible Stock• SPACS, PEGs, PIPES• Pink Sheets (OTC)
Make Your Own Rules:
If You Can Imagine It…
• “Project Debenture”• Interest• Royalties• Options / Warrants
