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

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