stages of development - International Business Growth Radio Network

Scott Geller – The CFO Perspective - How and where do I access funding?

15/3/2021

Scott Geller – The CFO Perspective

Episode: How and where do I access funding?

Date: March 15, 2021

IBGR.Network - PROFIT Radio. Everything a business owner needs to start, grow or exit a business. GROW WITH US.

INTRODUCTION
I have 20 years of experience in the finance realm that started with the Federal Reserve Bank as a bank examiner, moved on to 7 years at a Fortune 300 insurance company, and then a 50-70 person spin-off technology firm under the Allianz umbrella of companies. I was with the spin-off from day zero all the way until the unfortunate end and I had to close down the business.

I am now a financial consultant serving primarily as a fractional or part time CFO for companies that range from start ups to young and scaling to established with stable growth. I take over from the accountant as a lean cost effective option for Profits Engineering, Cash Optimization, Strategic Acceleration and Executive Partnering committed to your success. Please contact me at scott.geller@capitisadvisors.com.

PROBLEM STATEMENT/SHOW OBJECTIVE
A growing business will typically find a point where the working capital is insufficient to fuel the market demand or the identified potential for a company. The business needs additional cash until profits are sufficient to support the growth stage. The flip-side is a cash need for a downturn requiring funding to bridge a period of uncertainty or afford expenses until an issue, uncertainty, or bridge period abates and the business can return to generating sufficient cash.

Regardless of the need or situation, the path to continue operating independently requires funding or additional cash. The source of the cash falls into three buckets - debt, capital, or a deal - to provide the necessary funds to allow the business to survive through this period.

However, it's not easy to choose a path or know the most appropriate path especially when most every situation is unique, requires its own evaluation, and the response can depend on who you ask. The banker and venture capital provides a completely different answer for the exact same deal.

The trick is to be prepared by understanding your timing, quantifying your need, and proactively have options. The worst time to ask for money is when you are in a bad place and NEED money. Regardless of whether you decide on taking out debt, bringing in an equity partner, or fielding offers for a company deal, the entire process is a delicate dance that is frustrating and confusing without the proper expertise or support as a partner.

WHAT YOU NEED TO KNOW

Funding Sources
1. Credit or debt
2. Capital
3. Reinvestment
Credit
1. Asset-Based Lending
  1. Small business loans
  2. Commercial real estate loans
  3. Accounts receivable financing
  4. Equipment leasing
  5. Healthcare financing
  6. project financing
2. Lines of Credit
3. Invoice Factoring
4. Merchant Cash Advance
5. Purchase Order and Trade Finance
6. Turnaround Finance
  1. Bridge & hard money loans
  2. stock loans
7. Grants
8. Alternative funding solutions have easygoing credit requirements and flexible terms that can be tailored to meet individual needs.
9. Alternative lenders also work with companies that have gone through ups and downs
10. Don’t make the mistake of assuming that a bank loan is the only solution to your business needs
Capital
1. Convertible Debt - debt or loan instrument that an investor gives to a company w/the intent that it will convert later to equity and not be paid as a standard bank loan would be.
2. Crowdfunding - when a group of individuals fund a company either through equity purchase, debt purchase, pre-sale ordering or a product, or gifting of money
3. Venture Debt - debt for an equity-backed company that doesn't have the cash flows to support traditional debt
4. Venture Capital - Providing funds to a company in exchange for ownership or equity in the receiving company
5. Equity Stake - Determined by the amount of funds contributed divided by a mutually agreed valuation of the company
6. Progression of capital investment
  1. Family & Friends
  2. Angel investors
  3. Seed stage -
  4. Series Seed
  5. Series A, B, C, D, etc to either sale, exhaust need for funding, or go public
7. Keys to raise money
  1. Do. Or Do Not. There Is No Try.
  2. Determine how much
  3. Choose the right attorney
  4. Know the players - accountant, VC, entrepreneur, banker, mentor
8. Book: Venture Deals by Brad Feld and Jason Mendelson

WHAT YOU NEED TO DO

Decision Points
1. Industry
2. Network
3. Amount of funding
4. Timeframe
5. Control of biz
Stage of company
1. startup
  1. Angel
  2. Seed
  3. Series
2. Scaling
  1. equity interest
  2. credit
  3. vendor
  4. clients
  5. AR
  6. Leasing
Cost
1. Capital - equity and ownership
  1. $1M with $4M valuation
2. Credit
  1. Collateral
  2. interest
  3. down payment
How to prepare for funding
1. When - before you need it
2. How much?
  1. NOT As much as possible vs What you Need
  2. What you need?
  3. Why you need it?
  4. Reserve
3. Due Diligence
  1. Search for term sheets
  2. ownership
  3. Financials
  4. Clients
  5. Business Plan
  6. Org Chart
  7. Organizational Agreement
  8. By-laws
  9. Description of business
4. Process
  1. Organize
  2. Use your network
  3. Knowing your business' strengths and weaknesses - be honest with yourself
  4. Reach out to parties with the correct intent and purpose - don't carpet-bomb
  5. Realize there are good and bad characters in this effort
5. Trusted Advisors and or Mentors bring experience, perspective, independence, and guidance

PREVIOUS : Episode 10 - 2021_03_08 - How and where do I access funding?
NEXT: Episode 12 - 2021_03_22 - What if I want to sell my business?

Resources:
You can connect with Scott via his website or LinkedIn
Connect on LinkedIn
See Scott’s Website