Overlooked and Misunderstood Capital Sources

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This session was presented by Kevin Laborde, President of Cash Flow Resources. Find out more at http://www.cfrscs.com.

Text of Overlooked and Misunderstood Capital Sources

  • 1. Overlooked & Misunderstood Capital Sources Kevin Laborde President Cash Flow Resources, L.L.C.
  • 2. Todays Objec;ves Cash versus Prots Equity Investments versus Debt (Loans) Tradi
  • 3. Se
  • 4. Cash versus Prots So I sell my product or service for more than its cost: I generate a prot I have liOle or no Cash Where is the cash from my protable opera
  • 5. Cash Opera;ng Cycle 5
  • 6. Cash is King What is a Good Customer? Capable and Willing to Pay Credit Terms for Customers Are they worth it? Trade Credit from Vendors & Suppliers Can you get it? The Balancing Act Based on What You Have, What Do You Need? 6
  • 7. Equity vs. Debt (Loans) You Need Capital to Operate Poten
  • 8. Equity vs. Debt (Loans) One has a Fixed Return (Debt) One has a Poten
  • 9. Equity Investments What do Equity Investors seek? Percentage Ownership Control? Competent Management Growth Opportuni
  • 10. Tradi;onal Bank Financing Who provides Credit? BANKS! Loans and Lines of Credit What makes a Loan a Loan? Fixed Contract to Repay Primary and Secondary Sources of Repayment *** Leverage Owner Returns with OPM 10
  • 11. Tradi;onal Sources of Capital - Debt Underlying En
  • 12. Tradi;onal Sources of Capital - Equity Underlying En
  • 13. Capital Availablity If Credit Availability is Too Low or Unavailable OR If Equity Investor Requirements Do Not Fit OR BOTH IT MAY BE TIME TO LOOK ELSEWHERE 13
  • 14. Non-Tradi;onal Financing Non-Tradi
  • 15. Non-Tradi;onal Financing Some of the Underwri
  • 16. Non-Tradi;onal Financing U
  • 17. Non-Tradi;onal Financing Non-Tradi
  • 18. Major Forms of Alterna;ve/ Non-Tradi;onal Financing Factoring A/R- (Think Visa/MC versus Cash Sales or A/R) Purchase Order (P.O.) Funding - on CommiEed Product Sales and Manufactured Products Both of These Accelerate a Companys Cash Flow Cycle 18
  • 19. Merchant Advances on Credit Card Sales Hard Asset Lending Against Real Property Equipment Leasing 19 Other Forms of Alterna;ve/ Non-Tradi;onal Financing
  • 20. Factoring Basically Means the Sale of a Commercial Invoice Available to Companies Selling Goods and Services to Other Companies (B to B) Purchaser (Factor) Buys Invoices from Seller at a Discount When Seller Has Cash Requirement Sellers Customers (Debtors) Remit Payment Directly to Factor 20
  • 21. Factoring Discoun
  • 22. Cash Opera;ng Cycle 22
  • 23. Factoring Advance Client Sells Product or Service and Sends Invoice to Customer (Debtor) Client Submits Invoice(s) to Factor for Funding Factor Veries the Invoice with Debtor Once Veried, Factor Advances Funds to Client Based on a Pre-established Advance Rate 23
  • 24. Factoring Repayment Debtor Remits Payment to Factor to SeEle Advance on Invoice Once Advance is SeEled Factor Remits Any Percentage Held in Reserve to Client Less Fees Cost of Factoring Impacts Opera
  • 25. Purchase Order Funding A Handy Short-term Funding Tool for Companies Facing Growth Opportuni
  • 26. Purchase Order Funding Structures Dier but May Take the Form of an LeEer of Credit Funded upon Product Delivery Typically for a Producer, Distributor, Wholesaler or Reseller of Manufactured Products Can Be Done by Itself but Ocen Put in Place in Conjunc
  • 27. Factoring versus PO Funding Both Are Structured Based on the Underlying Transac
  • 28. Merchant Advances Lump Sum Advance Based on Monthly Credit Card Sales Repayment Amount Based on a mul
  • 29. Merchant Advances Structured to Not be a Loan It is the Sale of Future Credit Card Related Revenue Repayment a Func
  • 30. Hard Asset Lending Private Investment Groups or Individuals Secured - Land and Commercial Property Bridge Financing to a Long-term Deal Low Loan to Value (~60%-70%) LTV Calculated Based on Liquida
  • 31. Equipment Leasing Available for Large and Small Ticket Items - Anything From Computers to Heavy Equipment Lender Owns the Asset and Leases or Rents It Back Conserves Liquidity for Other Needs Personal Guarantees Generally Required Sellers of Equipment Ocen the Best Source 31
  • 32. To Sum it All Up Are You in Need of an Equity Investment or a Loan? If an Investment, What Percentage Ownership Do You Want to Give Up & Is Now the Time to Do It? If a Loan, How Much Can You Aord or Qualify to Borrow? 32
  • 33. In Conclusion If Neither a Loan or Investment Works for You, Think through Your Other Op