Sources of Financing

The High Performance Programfrom

Strat/Assist

Supplier Financing

• Divide Your Business Among Suppliers• Enables you to stagger your payments• still be able to pay your creditors if they become impatient

Supplier Financing (2)

• Patronize Different Vendors• from other regions or industries• payment terms are more favorable

Supplier Financing (3)

• Avoid the 3 M’s• Mistrust• Miscommunications• Misunderstanding

• Explain the Need to Extend Payments• justify cash flow situation to suppliers• Convey the impression that you are honorable people working

to get your company’s finances under control

Supplier Financing (4)

• Be Cautiously Aggressive• Propose a payment plan your company can meet

• Let Supplier Know About Other Companies Want Your Business

Where The Cash Comes From

Trade Credit (credit line from vendor) 65%

Credit cards (for business) 40%

Commercial Bank Loans, Secured with Business Assets 35%

Personal Bank Loans 15%

Personal Loan From a Friend or Family Member 6%

Other 7%

No Use of Financing 12%

Source: “Small Business Credit Survey”, Dun & Bradstreet, August 1994, New York City

Sources of Business CreditAugust 1993 to August 1994

Do You Really Need A Bank?

• Micro-Lenders• CRA Requirements

• Investment Banks• Brokerage Corp. Checking Accounts• Reg Q & The Cash Management Account

Deal With Multiple Banks?

• All your eggs in one basket• Each Depositor Insured to $100,000• Security Reasons• Competitive Reasons

What Bankers Can Do For You

• Network• Show you how to save costs• Treat you with respect• Do business with you• Mutual Customer Service Philosophy• you are there customer, they are yours

• Collection Services (bounced checks)• Education• Financial Advice

When Its Time to Change Banks

• Services Not Available of Offered• Long Term Relationship Not As Important• Too Difficult to Get Credit, Tough Terms• Bank Turnover Too High• Bank Merger• Bank Has Deteriorating Financial Strength

Banker Knows Your Business

• Do they get monthly statements, agings• Educate them• Alert them to Adverse Situations

Know the Top Dog

• Personal vs. Professional• Local vs. Non-Local• Entrepreneurial Banks• Small vs. Big• Attention vs. Services

Venture Capital Trends

• Communications 14%• Retail 6%• Biotechnology 10%• Medical Tech. 7%• Software 18%• Electronics 10%• Healthcare 15%• Other 20%

• 1994 Investments -$1.3B• 55% invested in late stage,

mezzanine, and LBO

Source: “Venture Capital Survey”, Coopers & Lybrand, Feb. 1995

Public Shells

• Reverse Merger - find public shell and transfer 51% of stock in return for cash or note.

• Base remaining transfer on price based on cash flow for one year some time in the future• incentive to leave cash in the business.

• Public shell will sell stock to pay owners.• Owners can revoke public shell any time

before final stage.