The Challenge of Improving Business Finance and Business Financing
Business finance and business financing are different but related business functions. The Business Finance function refers to the daily activities necessary to account or measure the business’s success. The Business Financing function on the other hand refers to the activities focused on getting the business the short and/or long-term capital it needs to operate and grow.
Business Finance
As mentioned, the challenge of the Business Finance function refers to the daily activities necessary to account or measure the business’s success. Business accounting is usually a series of rote processes dictated by acceptable accounting standards and practices as defined by AICPA and mandated by various governmental rules and regulations. The mechanics of the finance function are usually accomplished by automated accounting systems managed by certified accounting professionals. As a result, unless the challenge has to do with the underlying automated accounting systems, we suggest any accounting issues be referred to your business’s accounting firm. If you suspect a problem with your accounting systems, please look up our capabilities under the Information Systems service.
Business Financing
Are you thinking about getting additional financing for your business? Do you want to greatly increase your chances of receiving favorable terms? If so, determine if you are ready to seek financing.
When trying to get financing companies contract with institutions (banks, finance companies, etc.) to structure the financing transaction. These entities have their forms and checklists to help assure themselves you will be able to repay the loan and/or provide the expected return on investment (ROI). If during their due diligence, they uncover problems with the business that may impact the expected ROI; they may increase their rates to compensate, or worse, call off the loan/financing. You don’t want this to happen, you want their due diligence to be successfully completed. So, wanting to finance your business and being ready to do so are very different.
To help you determine if you are ready seek financing, we have prepared a brief 15-question Business Readiness Self-Assessment that should get you to consider your company’s performance in key business functions. If after completing this assessment you are confident your company is a top performer in all its activities, congratulations! Seek that additional capital or find your buyer. On the other hand, if you are unsure of one or more of the functions or would like verification of your own assessment, we are ready to help.
We will provide your management team with tools that can help recognize potential problem areas. Leveraging our proven skills, functional and industry experience, we will teach your management team how to identify and resolve any outstanding operational, financial and/or organizational issues prior to exposing them to outsiders. As an ongoing benefit, during this process, your team will learn how to continually identify bottlenecks, eliminate them and maintain extraordinary execution. Please see Business Problem Solving Workshop Overview and Maximize Your Company’s Profitability.
Give us the opportunity to improve your chances with a prospective lender, investor, or buyer. You have nothing to lose. There is no cost or obligation unless you agree:
- We can help;
- We are qualified to help; and
- The proposed help adds value.
Based on former professional associations with commercial banks, bank holding companies, venture investment firms and service providers, the following is a list of different capabilities that can be selected and/or mixed to provide short-term expertise to meet the various challenges associated with raising capital and/or selling a part or all of your company:
Financing Organization and Preparation
- Business Organization and Development
- Business Plan Development, Enhancement and Reorganization
- Financial Modeling and Plan Development
- Business Valuation
Financing Facilitation
- Identification and acquisition of private equity, investment capital and other related types of financing through an extensive personal network of high net worth individuals (Angels), Venture Capital firms, private equity firms, commercial banks, commercial finance companies, asset-based lenders and lease financing resources
- B-to-B financing and private equity transactions
- Assistance regarding investor presentations and vendor finance procedures
- Interest rate risk management
Special Situation Assistance
- Crisis Management
- Turnarounds
- Workouts
Citations
The following paragraphs describe two examples of how we put our knowledge and skill to work by leveraging one or more of the above listed Financing capabilities to the benefit of our clients.
Example One – Public Debt Finance Transactions
As CFO for Citibank, MD and the CHOICE business, acted as the lead business contact for the securitization of almost two-thirds of the receivables. Worked closely with the investor community, the rating agencies and Citibank’s sales staff to educate them about the CHOICE portfolio and business.
Result: The two-tranche deal included $1 billion of two-year and $1 billion of five-year floating rate notes with an A-B subordinate structure. At the time it was the largest, non-sovereign, floating rate debt deal ever done.
Example Two – Financial Modeling and Prospective Investor Presentation for Startup
Assisted an entrepreneur who wanted to substantially grow his new, high-risk, debt consolidation and reduction servicing business. The engagement consisted of developing and constantly modifying an economic model of the business and a presentation for prospective financial investors. The debt refinancing model enabled changing key variables and assumptions such as: number of customers, average amount of customer debt, trust payment percent, percent participating in loan program, settlement percent, fee percent, marketing cost, investor’s equity percent, investor’s debt amount, investor’s debt interest rate, etc. The presentation included slides that presented the overall pitch to investors, a description of the business (depicted money flow across key participants and components), key industry statistics, the customer’s cash/debt flow and economics, the client’s cash/debt flow and economics, three possible economic models depicting low, medium and high customer participation rates, the prospective investor’s cash/debt flow and economics under three scenarios: debt, equity and hybrid, and finally, the proposed deal structure. The model and presentation underwent multiple iterations over a period of several months, as the client learned the effect of his modeling assumptions and feedback from prospective investors.
Result: The client was able to obtain financing agreement for purchasing $2 million of additional customer debt per month for five years for a total of $120 million.
If you would like help recapitalizing part or all of your business please Contact Us.