Download Show Me the Money! - Fuse Financial Partners

The Color(s) of Money
Financing Growth…
Without Going to the Bank
Today’s Objectives
1. Be the Shark, Not the Mark
Rules of the Funding Game
2. Solids or Stripes
The Colors of Money
3. What’s the Wager
How Use Determines Source
4. Tricky Combo Shots
Non-Bank Options
1. Be the Shark - Not the Mark
The Mark
1.
2.
3.
4.
5.
6.
7.
Looks in the Wrong Places
Lacks Knowledge of Process
No Clear Budget
No Business Plan
Can’t Possibly Pay it Back
Too Early – Risky
Too Late – Behind the 8 Ball
The Shark
1. Financial Responsibility
– Personal Credit Score
– Business Profitability
2. Clear Plan
– Use of Funds
– Business Model
– Payback with Timelines
3. Team
– Relevant Industry Experience
– Business Sense
Case Study: Shark Tank
• What Caused Them to Compete
Over This Deal?
• What Were the Impacts of Each
Offer?
• What’s the Relative Valuation?
• Which Would You Choose?
SHARK TANK
Shark Tank
SpikeBall
KEVIN
• Loan $500k @ 9%
• 10% warrant @
$0 cost
• $0 valuation
DAMON
• $500,000
• 20% of business
• $2.5 million
valuation
Solids or Stripes:
Loan or Equity
Mix & Match Uses to Sources
Intangible
SAVINGS
Cash
SELF
FINANCE
Tangible
LOANS
& CREDIT
Credit
Intangible
ANGEL
CAPITAL
VENTURE
CAPITAL
Equity
Tangible Uses of Funds
Tangible Purchases
• Equipment
• Real Estate / Office Building
• Supplies & Raw Materials
• Positive Cash Flow
• Receivables
• Ongoing Concern
Intangible Uses of Funds
•
•
•
•
•
•
Take a Salary
Fund On-going Losses
Create a Proof of Concept
File a Patent or Draft Designs
Travel
Marketing / Advertising
What’s the Wager:
What You Need Determines
Where You Look
Rule:
Match Your Sources & Uses
• Identify “Use Of Funds”
– Set Clear Budgets
– Know What Things Cost!
• Forecast Growth & Payback!
– Know What “Drives” the Business
– Know When You Break Even
What is Breakeven?
•
•
•
•
•
Break Even
Cash Flow Positive
Discounted Cash Flow
Internal Rate of Return (IRR)
Cost of Capital
Features & Benefits
•
•
•
•
Interest Rate < Rate of Return
Term Or Tennor < Useful Life
Other Covenants or Terms
People: Can You Live With
Them?
Example: “Build a Distribution Ctr”
USES
Land & Building
Trucks and Equip.
Inventory
New employees
SOURCES
Mortgage (6%)
Vendor Lease (10%)
SBA Loan (12%)
Mezz Loan (18%)
Case Study
Tricky Combos
(Non-Bank Funding Sources)
Use What
You’ve Got
“The money will come from
wherever it is now”
Where it is Now
Purchase
Deposit
Receive
Bill
Assemble
Sell
Hold
Where it is Now (2)
•
•
•
•
Collect Receivables
Hold Payables
Cut Down Inventory
Find Hidden Inventory – Not in
the System / Samples
• Sell Equipment
• Expired but Sellable products
• Discretionary Expenses
Looking Deeper
and Broader
More Skin in the Game
PERSONAL CREDIT
Convert 401k to Stock
Credit Cards
Leveraged Savings
Mortgage
Second Mortgage
Third Mortgage
Life Insurance (Var. Ann.)
Margin Accounts (Stocks)
Title Loans (at a Bank!)
OPM
Friends
Family
Customers
Vendors
Equip Leasing
Government: SBIR / OPIC
Private Grants
Affinity Investors
Angel Groups
PEGs
Venture Capital
New & Improved OPM
• KickStarter / Indiegogo
• New JOBS Crowdfunding
• General Solicitation
Case Study
Combination Shots
•
•
•
•
•
•
•
Bridge Loans
Venture Loans
Mezzanine Loans
Angel Guaranteed Loans
Convertible Stock
SPACS, PEGs, PIPES
Pink Sheets (OTC)
Make Your Own Rules:
If You Can Imagine It…
•
•
•
•
“Project Debenture”
Interest
Royalties
Options / Warrants