May 21st - Borrowing to Fund Business Growth - Brief Capital One (2)

8/12/2019 May 21st - Borrowing to Fund Business Growth - Brief Capital One (2)

1/15


2/15

TYPES !EY "SPECTS#F F$%"%C$%G

Matching Offerings to the Needs of the Business


3/15

3

BankFinancin

g

&ine o' Credit

Ter Debt&easing

Debt Financing #tions


4/15

4

Line of Credit

* Facilit+ a,ailable as needed o,er

the ter o' the agreeent

* #'ten ,ariable rates charged* Rea+ent is interest onl+ or interest lus rincial

Fre-uentl+ used to 'und short.ter wor/ingcaital needs and une0ected e0enditures

Debt Financing #tions


5/15

5

Term-Debt

* &oan 'or a 'i0ed aount with

seci'ic rea+ent ters

* $nterest rates a+ be 'i0ed or ,ariable* Generall+ does not ro,ide 'or borrowing

be+ond the initial aount

* Fre-uentl+ used to 'und asset ('acilit+and e-uient) urchases

Debt Financing #tions . continued


6/15

6

Leasing

Financing arrangeent ro,iding the right

to use an asset o,er a eriod o' tie

Re-uires a+ents o,er the ter o' the arrangeent Ma+ or a+ not trans'er ownershi o'the asset at the end o' the lease ter

Used b+ coanies to 'ul'ill their assetneeds without signi'icant u'ront in,estents

inherent in urchase transactions

Debt Financing #tions . continued


7/15

!EYS T# S1CCESSF1&B#RR#2$%G

Optimizing the Chances of a Desired Outcome


8/15

8

Be Preared

Ea!uate "our business b" considering the fo!!o#ing$

%trengths and opportunities

&eaknesses and cha!!enges

'our current financia! situation and needs goingfor#ard( be rea!istic( for start-up businesses) !enders!ook at "our persona! financia!s

*ssemb!e information for presentation to prospectie!enders + be it a bank or an a!ternatie ,micro !ender


9/15

9

Build an E''ecti,e Dialogue

Bui!d an open and honest dia!ogue$ .roide an understanding of the compan"/s current state and

ision for the future

Discuss ke" ob0ecties) ackno#!edging ke" risks and re!atedremediation p!ans

1ain an understanding of the !ender/s !oan products ora!ternatie so!utions and re!ated re2uirements

Start early: It usually takes more than one meeting to get

the best borrowing solution.


10/15

10

3 Cs o' Credit

Character

3s the co!!atera! sufficient as a secondar" source ofrepa"ment4 3f the co!!atera! must be !i2uidated) is therea!izab!e a!ue enough to repa" principa! and outstandinginterest) andcoer the bank/s administratie costs of !i2uidation4

&hat are the economic and market conditions that cou!dimpair the compan"/s abi!it" to serice the debt and repa"the !oan4 Does the compan" recognize these risks andhae p!ans to mitigate them4

Does the borro#er demonstrate a commitment to honor

his or her transactions and keep promises een underaderse circumstances4

Caacit+

Conditions

Caital

Collateral

Does the business demonstrate the capacit" to re-pa" the!oan funds4 Does management hae a business p!an4*re the p!ant and e2uipment sufficient4 *re marketingand product de!ier" #e!! dee!oped4

Does the compan" hae sufficient net #orth to absorbnorma! business risk4


11/15

11

The &oan "lication

Ensure that the !oan app!ication is comp!ete and accurate Core bank !oan app!ication information often inc!udes$

5istorica! business financia! information ,6 "ears

Business and o#ner/s persona! ta7 returns ,6 'ears

.ersona! Financia! %tatement

3nterim financia! statements of the business and its o#ner for thecurrent 8 prior "ear) a!ong #ith accounts receiab!e and pa"ab!eaging reports

*!ternatie ,micro !oan app!ication is simi!ar) but often a!!o#ssome f!e7ibi!it" + ask 2uestions9


12/15

12

Sources o' Rea+ent


13/15

13

Cash Flow Fro #erations .4uestions to Consider


14/15

14

Guarantor Suort Collateral5Securit+ .4uestions to Consider


15/15

Thank "ou for attending

May 21st - Borrowing to Fund Business Growth - Brief Capital One (2)

Documents

Transcript of May 21st - Borrowing to Fund Business Growth - Brief Capital One (2)