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ACCESSING CAPITAL FOR
DEFENSE SUPPLIERS
September 18, 2019University of Southern California
This course was prepared by the Price School - USC Center for Economic Development under a sub-award with the Governor’s Office of Planning and Research, with financial support from the Office of Economic Adjustment, Department of Defense. The content reflects the views of the USC Center for Economic Development and does not necessarily reflect the views of the Governor’s Office of Planning and Research or the Office of Economic Adjustment.
September 18, 2019University of Southern California
Accessing Capital for Defense Suppliers
September 18, 2019USC Orange County Campus
Irvine, CA
Funded by the Office of Economic Adjustmentin the Department of Defense
Logistics
• All audio will stream through your computer speakers.
• Please submit your questions anytime throughout the presentation in the chat box, located on the bottom of your screen.
• Webinar recording and slides are posted within one week of the event.
ampsocal.usc.edu/webinars
Capabilities
•Planning•Economic development and policy studies•Feasibility and market analyses•Needs assessments
Outreach arm of the Price School of Public Policy
Supports EDA’s mission by•Providing technical assistance to
economically distressed and underserved communities
•Developing strategies to enhance collaborative regional innovation
• GIS mapping• Consensus building• Technical assistance workshops• Strategy development
Who We AreAMP SoCal is led by the USC Center for Economic Development (CED), an applied research center of the USC Sol Price School of Public Policy, in partnership with the City of Los Angeles and over 135 companies and organizations.
Partners Include:
Today’s Speakers
Gregg Profozich, Dir. Of Advanced Manufacturing Technologies, CMTC
Jose Leuvano, AVP and Branch Manager, California Credit Union
Stacy Sanchez, Vice President of SalesCDC Small Business Finance
Stephen Pierson, Vice President of Regional Sales Pitney Bowes
George Uhl, Senior Relationship Manager, Citizens Business Bank,
Small Business Debt Options
Source:fitbizloans.com
Getting past the initial screening can be a challenge.
For a larger loan request ($ 500,000 or more) a site visit from a loan officer and enough initial information about your company to interest him/her in lending to you.
Neither financial statements alone nor your company web site are not enough to inform a lender.
Business plans are not helpful in telling the company's real story to a lender
Those key things that make the company different from its competitors must be described by someone who understands them.
Accountant prepared documents can’t be substituted.
This can only really be done by the owner or chief operator with an organized narrative.
Telling Your Story
Your Financial Line Card‐ A slide deck that can narrated in person or over the phone while the lender watches on their computer.
Presentation should be designed to open the dialogue, not close the deal.
Goal is to whet the lender’s appetite for learning more about your firm and how their loan can help you grow.
An effective presentation will get them interested enough in your business and loan request that it merits a site visit.
PowerPoint, Google Slides and Keynote are common programs used to make a slide deck. There are many others available online.
Telling your company’s story with 12‐15 power point slides that you narrate will increase your chance of securing interest and a visit from a lender and start the process for the loan you want.
Sharing Your Story
Typical Questions from Lenders
Source: Opportunity Fund: https://opportunityfundloan.org
1. How much money do you need?
2. How is your credit profile (sometimes business and personal)?
3. How will you use the money?
4. How will you repay the loan?
5. Does your business have sufficient net operating income to cover debt service?
6. What collateral is available to secure the loan?
DEFENSE CO.
We make high quality precision parts on time.
3355 FigueroaSt.
Los Angeles, CA90018
(213) 740‐4283tduran@defenseco.com
www.defenseco.com
Logo
CERTIFICATIONS
© Defense Co. ‐ 2018
Minority OwnedBusinesses
Hub ZoneQualified
AS 9100 Rev. D
ISO 9001
Cybersecure
Northrup PlatinumSupplier
OUR SHOP
We make parts bigger than a bread box and smaller than a Fiat.
We have 5 CNC lathes and 4 CNCmills.
State of the art quality control measuring machines
Our welders work with aluminum alloys and all grades of steel.
DEMAND DEMONSTRATION
The market trend shows increased opportunity for our services.
This is fueled by increased defense spending
OUR COMPETITION
We are the best option because we perform on time.
Clients like our ability to work with them to problem solve.
Our skilled workforce is our competitive advantage.
Work Quality Evidence‐ Platinum Supplier recognition
THE BUSINESS OPPORTUNITY
Precision machine shops are profitable enterprises when runcorrectly
Historically, Defenseco has averaged total compensation in excess of $ 3,500,000 per year with 12 clients
The gross profit margin for the business overall 12% at capacity
We see a need for $475,000
CAPITAL NEED
We need funding to purchase:
Two 3D printing Machines ($75,000 each) Computer server New electrical infrastructure
$450,000$ 15,000$ 10,000
Subtotal $475,000
PAST FINANCIAL PERFORMANCE
$‐
$1,000,000
$2,000,000
$3,000,000
$4,000,000
$5,000,000
2014 2015 2016 2017 2018
Expenses Revenue
NEW REVENUE SOURCES
Contract Term BeginDate Total ContractValue Status
Aerospace Part 1 2years 1st Qrt 2020 $350,000 Signed
Automobile Part 3years 2nd Qrt 2020 $50,000 Signed
Prototype Part 1 NA 3rd Qrt 2020 $50,000 Signed
Prototype Part 2 NA 2nd Qrt 2020 $40,000 Signed
Aerospace Part 2 1year 1st Qrt 2021 $300,000 Negotiations
Aerospace Part 3 1year 1st Qrt2021 $250,000 Negotiations
Aerospace Part 4 3years 2nd Qrt 2021 $400,000 Bid out
HOW WE MAKEMONEY
Our break even projections are based on a $1,500,000 ofnew income.
Even with only existing contracts, we are still profitable.
Our net profit before taxes will be $ 500,000
PROJECTED CASH FLOWAVAILABLE FOR DEBT SERVICE
$301,875
$319,463
$325,852
$313,048
$285,000
$290,000
$295,000
$300,000 $315,000
$305,000
$310,000
$315,000
$320,000
$330,000
$325,000
2018 2019 2020 2021 2022
Cash Flow
HOW WE MITIGATERISK
The improvement proposed constitute
bankable collateral due– if we fail another
shop will snap up thissite.
There is a risk that our management is
inadequate; to offset this we are offering personal guarantees backed by
real estate equity
Questions and Discussion
Visit ampsocal.usc.edu for more webinars and information
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