The Color(s) of Money

Financing Growth… Without Going to the Bank

Today’s Objectives

1. Be the Shark, Not the MarkRules of the Funding Game

2. Solids or StripesThe Colors of Money

3. What’s the WagerHow Use Determines Source

4. Tricky Combo ShotsNon-Bank Options

1. Be the Shark - Not the Mark

The Mark

1. Looks in the Wrong Places

2. Lacks Knowledge of Process

3. No Clear Budget

4. No Business Plan

5. Can’t Possibly Pay it Back

6. Too Early – Risky

7. 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

VENTURECAPITAL

ANGELCAPITAL

LOANS& CREDIT

SELFFINANCE

SAVINGS

Tangible IntangibleIntangible

Cash Credit 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

Receive

Assemble

HoldSell

Bill

Deposit

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 CREDITConvert 401k to Stock

Credit CardsLeveraged Savings

MortgageSecond MortgageThird Mortgage

Life Insurance (Var. Ann.)Margin Accounts (Stocks)Title Loans (at a Bank!)

OPM

FriendsFamily

CustomersVendors

Equip LeasingGovernment: SBIR / OPIC

Private GrantsAffinity Investors

Angel GroupsPEGs

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