What To Do When The Bank Says Bw

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business finance, factoring, accounts receivable finance

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What To Do When The Bank Says Bw

  1. 1. What to do when the bank says “No” and understanding why Making sense of it all
  2. 2. Collateral Secured Financing -vs.- Unsecured
  3. 3. Unsecured Financing
  4. 4. Secured Financing
  5. 5. Secured Financing <ul><li>Accounts Receivable </li></ul><ul><li>Inventory </li></ul><ul><li>Equipment </li></ul><ul><li>Real estate </li></ul><ul><li>Cash / CD’s </li></ul>
  6. 6. What will and won’t work for a bank? <ul><li>Two or more years of tax return history </li></ul><ul><li>Positive retained earnings </li></ul><ul><li>Positive cash flow </li></ul><ul><li>Collateral </li></ul><ul><li>Profitable </li></ul><ul><li>Minimum Credit Criteria </li></ul><ul><li>In business for less than two years </li></ul><ul><li>Weak earnings </li></ul><ul><li>Negative cash flow </li></ul><ul><li>Rapid growth </li></ul><ul><li>Tax liens </li></ul><ul><li>Poor credit </li></ul><ul><li>Too much short term debt </li></ul>
  7. 7. Outside the box financing <ul><li>Factoring </li></ul><ul><li>Asset based financing </li></ul><ul><li>Collateral lenders </li></ul><ul><li>Equipment leasing </li></ul><ul><li>Secured Debt instruments </li></ul>
  8. 8. Factoring Invoices Selling an invoice minus a discount To accelerate cash flow Who is the biggest factor in the world?
  9. 9. Have you ever felt like a Night in Shining Armour picking up checks for payroll?
  10. 10. Who Qualifies for Factoring <ul><li>Business to business transaction </li></ul><ul><li>Must have accounts receivable owed by other businesses </li></ul><ul><li>Negative retained earnings </li></ul><ul><li>Start up businesses </li></ul><ul><li>Tax Liens </li></ul><ul><li>Current losses </li></ul>
  11. 11. Asset Based Financing Formula Based Lending <ul><li>Accounts receivable -Up to 90% advance rate- depending of business trade </li></ul><ul><li>Inventory- Up to 50% finished goods- Some raw material </li></ul><ul><li>Equipment- Up to 60% liquidate / auction value </li></ul><ul><li>Commercial real estate- 65% FMV </li></ul>
  12. 12. Who Qualifies for asset based loans? <ul><li>Collateral – hence asset based loan </li></ul><ul><li>Business to Business transactions </li></ul><ul><li>Positive retained earnings </li></ul><ul><li>Current losses </li></ul><ul><li>Tax liens </li></ul><ul><li>Must have accounts receivable to get an inventory advance </li></ul><ul><li>250K and up in monthly borrowing needs </li></ul>
  13. 13. Hard Money Collateral Lenders <ul><li>Commercial Real Estate only </li></ul><ul><li>65% LTV improved properties </li></ul><ul><li>50% LTV Land only </li></ul>
  14. 14. Who Needs it? <ul><li>Poor Credit </li></ul><ul><li>Tax returns show losses </li></ul><ul><li>Too aggressive on taxes </li></ul><ul><li>Cash flow weak </li></ul><ul><li>Fast cash </li></ul>
  15. 15. Equipment Leasing <ul><li>Purchases 10% down </li></ul><ul><li>App only $100,000-Minimum credit 650 </li></ul><ul><li>App Only $50,000- Credit under 650 </li></ul><ul><li>Flexible terms </li></ul><ul><li>Refi’s- up to 65% FMV </li></ul>
  16. 16. Secured Debt Instruments <ul><li>Form of factoring </li></ul><ul><li>Any contract for repayment can be sold minus a discount </li></ul><ul><ul><li>Business Notes </li></ul></ul><ul><ul><li>Real estate notes </li></ul></ul><ul><ul><li>Insurance annuities </li></ul></ul><ul><ul><li>Structured settlements </li></ul></ul><ul><ul><li>Commercial lease revenue </li></ul></ul><ul><ul><li>Lottery winnings </li></ul></ul>

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