DIC Excellence Series May Session - Raising bank finance for Service and IT companies

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Raising bank finance for Service and IT companies

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  • 1. DIC Excellence Series Presented by Salvus Advisors JLT Raising bank finance for Service and IT companies24/05/12 1
  • 2. How banks perceive ALL SMEs…..SMEs are perceived as high risk…High concentration risksKey man riskLimited fall-back optionsPoor financial management & transparencyUnable to articulate financing needsSkip risk24/05/12 2 © Copyright SALVUS. 2011
  • 3. How are IT and service companiesdifferent?Hardware (IT) and service companies slightly different…Both sectors perceived as higher risk.Low entry barriersNo exclusivity, low USP levels?High stock obsolescence riskService companies : Dealing in intangiblesHigher risk of commercial disputes 24/05/12 3 © Copyright SALVUS. 2011
  • 4. The Preparation: If you are a Start upBy start up, any firm that is less than 2 years old…Begin by maintaining clean accountsUse an outsourced accounting service providerEnsure you have good (cheap) softwareGet your accounts audited by a bank empanelled auditorEnsure your payment record is goodOpen operating accounts with 2 “right” banksBuild good reputations with buyers/suppliers 24/05/12 4 © Copyright SALVUS. 2011
  • 5. Start-ups, continued…..Balance sheet lending to start-ups, almost impossible now.So what are your options?Expensive parameterized loansSome structured trade financing MAY be possible24/05/12 5 © Copyright SALVUS. 2011
  • 6. Mature, 1st time borrowersHard work, even for mature companies, especially serviceproviders…Clearly identify financing needs as a bank wouldPrepare a brief but comprehensive business planPut together a comprehensive information packIdentify the appropriate bankGet introduced, if possible24/05/12 6 © Copyright SALVUS. 2011
  • 7. Showcase your strengthsIdentify your strengths. Consider whether you have:High quality suppliers / buyersSome identifiable USPEstablished track record with suppliers & clientsGood history of managing stocks & receivablesNumber of repeat clientsTestimonials from suppliers/clientsProcess qualifications from international, reputed bodiesFinancials audited by reputed auditors24/05/12 7 © Copyright SALVUS. 2011
  • 8. Case study..1st time borrowerThe client…Logistics, freight forwarder, supply chain service providerPros: Good client base Reasonable financials Fast growingCons: Chunky exposures to few clients Slightly erratic track record No borrowing track record © Copyright SALVUS. 2011
  • 9. The SALVUS Solution…. Chose bank that understood service industries Structured financing based on company strengths Focus: performance track record and quality of clients Short duration of debtSolution: to set up a factoring line for discounting receivables.Next step: to finance network expansion vide loans, once track record established. 24/05/12 9 © Copyright SALVUS. 2011
  • 10. THANK YOU24/05/12 10