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Tuesday, December 21, 2010

BLUE THING #2: Expert Advice from TNNWC

Each Week, TNNWC presents an article written by one of its top guns (actually, top minds) offering you EXPERT INFORMATION AND ADVICE for powering up and growing your business. This is some of the best information available. Read it, think about it, and then PUT IT TO WORK.

TNNWC™ Proudly Presents...

This Week’s Article: Specialized Financing & Credit Enhancement Services

Blue Bottom Line: (Why should I care? Why should I read on?)
  • You need money
  • You have a cash flow problem
  • You need new equipment
  • You need some financial support for your future plans
  • You would like to learn about financial alternatives still available to your emerging enterprise in these difficult economic times

As a member of the TNNWC Group™ and Global Interconnected Cooperative Business Community (GICBC), you have access to an entire suite of products and services to reduce costs improve efficiencies, and increase sales and profits. This week’s featured service, Specialized Financing & Credit Enhancement Services, is provided by The National Networker Companies (TNNWC) Group™ .

Due to the incredible response we received regarding my recent article on specialized financing and credit options for your company, I am providing a reprise of some of this key and important information you can use to fuel your emerging enterprise.

You should never be reduced to begging and groveling for hand outs from friends, family and strangers to try to survive. Sadly, it seems that emerging enterprises today are being reduced to this humiliation in this down economy and credit crunch. Financing seems to have dried up for companies like yours. There is no respect…….you will not be taken seriously!

It is time to get off of your knees and brush yourself off. Here is some GOOD NEWS in the form of alternative financing solutions!

If you cannot get a bank loan (because your company is not in the Fortune 1000 category), and your company's business is not necessarily "sexy" enough for some of the high-tech, exit-strategy obsessed venture capitalists or big enough for the investment banking fraternity, the caring folks at TNNWC may have an alternative financing solution for you. Their financing experts direct and introduce you to the appropriate non-traditional financier who can bridge the gap between your dreams and your success.

Alternative Financing & Credit Approaches

There are numerous means of financing your company’s capital requirements. They are unconventional and are provided by certain financial institutions or other parties with very highly specialized preferences.

Fortunately for you The National Networker Companies (TNNWC) Group™ has sorted out the good, the bad and the ugly of Specialized Financing & Credit Enhancement Services. TNNWC Group™ has brought together an impressive stable of thoroughbred financing and credit solutions. While I will discuss some of the alternatives very briefly below, it is important to know that an experienced TNNWC finance and credit expert can guide you to the alternative, or combination of alternatives best suited for your emerging enterprise’s needs. Based upon an evaluation of a simple Application, they will give you a first consultation and provide suggestions for:
  1. The type of unconventional financing that would suit your purposes best, and
  2. Where they would suggest your documentation be submitted in order to get you to a real closing.
You really should not try to fly solo in your search for financing. You probably do not know where all of the flight controls are and how to avoid the turbulence! After the initial evaluation a TNNWC expert will consult with you to give you the best flight plan to arrive at the money you need to fuel your business demands.

Angel Investors

Generally speaking, Angel Investors are wealthy individuals who invest in companies that are in their earliest stages, usually with unproven technology, but with interesting plans. Many Angel Investors are as in interested in the societal, humanitarian, educational or other non-financial aspects of the business or other organization in which they are participating. Angel Investors are often difficult to qualify, approach or to convince, although they have direct decision making authority and generally provide financing in amounts from $50K to $10 million. Generally speaking, beware of the “Angel Investor” who is acting as a syndicator of several investors’ funds (as well as his or her own). The terms of financing vary dramatically from deal to deal.

Venture Capitalists

Venture Capitalists are either individuals or entities capable of financing start-ups or young companies investments from $10 million up to several hundred million dollars. They look for tremendous growth potential, unique intellectual property, and a pre-planned exit strategy to recover their investment, either through a buyout by a major company (at a multiple of their original investment), a public offering, or some other means of getting a return of capital plus a significant gain within 1 – 3 years. They tend to take a large equity stake in the company and invariably get involved in corporate management and Board governance. They can also charge some very significant due diligence, document preparation, legal and commitment fees at the inception of a transaction. They look for rapid gains in a select few investments.


If your company sells to a diverse customer base and offers these customers extended payment terms, it will generate accounts receivable as the sales (and the earnings process) are completed. This portfolio of receivables can be pledged to a Factor, who will advance a percentage or their collectible value to your company in either a line of credit or in a series of advances. In some cases, the factor will merely be extending you credit. In the majority of the cases today, the factor will actually purchase your receivables at a discount of their full value, notify your customers to pay the Factor directly, and the Factor will ultimately give you some discounted portion (net of its fees and interest charges) of the proceeds when the customer remits to the factor. In most factoring arrangements, the factor may either hold back a reserve against potential losses; they might also have recourse to your company (and/or its principal owners) for any losses or shortfalls. They do not generally require any equity, and while their discount fees may cut deeply into your margins, they are a source of operating and growth capital to facilitate increasing revenues.

Single Invoice Discounting

If your company is relatively new and sells to only a small number of customers, or perhaps is dependent upon a few major clients for most of its income. Some companies will actually discount individual invoices (i.e., receivables) and advance you anywhere from 50% to 80% of the total amount of those invoices, notify your customer of the arrangement, collect from your customers, and will remit to you a potion of the face amount of the invoices, after deduction of their discount fees and interest. These firms are generally more expensive than larger factoring firms, but they are prepared to be more flexible with structuring terms and more liberal regarding whom they are prepared to do business with.

Equipment Leasing

If your enterprise requires the use of capital equipment, rather than spending a large sum of money to purchase it outright, the vendor may either introduce you to its own leasing subsidiary or to a leasing company with which it has an affiliation; the leasing company (the lessor) puts up the money to buy the equipment and lets your company (the lessee) have the use of the equipment in exchange for monthly payments which are similar to rent. The difference is that at the end of the lease term (usually anywhere from 3 to 10 years, depending upon the price tag and anticipated longevity or useful life of the asset) you will have an option to purchase the asset for some pre-arranged price (i.e., either a nominal amount, a percentage of the asset’s value – usually 5% to 15% of the original purchase cost – or at the equipment’s Fair Market Value at the time of the lease expiration. Note that unlike a rental arrangement, you are obligated, upon the execution of the lease, to make all of the monthly payments. In this manner a capital lease is very similar to an installment financing of an asset. When you make your final payment, your company usually will get legal title to the equipment, although sometimes legal title is actually conveyed at the beginning of the least term to afford the lessee the tax advantages associated with the depreciation of the equipment. While this is generally less expensive than factoring, it does not directly provide your company with operating capital – it simply eases your cash flow burden while allowing you to pay the asset off over time.

Purchase Order Financing

New companies and even more-established companies with large, confirmed purchase orders from creditworthy buyers often need the capital to pay their suppliers (to obtain goods for re-sale, by way of example) before they can fulfill these purchase orders and turn them into either receivables, or a paid orders. By way of example, If I own a small company which has obtained a large confirmed purchase order from an established company (anywhere worldwide) for $1.0 million, and my company requires $500K to buy the supplies to complete the order, a purchase order financing house will either “pre-factor” my “pre-receivable” and advance the funds to my suppliers; when the purchase order financier has received payment from my customer, that financier will pay my company its gross profit on the transaction (the difference between $1.0 million and $500K, reduced by a discount fee and interest on the advance made to my supplier. This can be done in cases where my supplier is demanding immediate payment or a letter of credit, even when my customer has not supported its purchase order with a letter of credit (i.e., “back-to-back” letters of credit). This financing is more expensive than individual invoice factoring, but it allows a relatively small company which is thinly-financed to sell to any creditworthy customer almost anywhere in the world. No equity is sacrificed to the P.O. Financier.

Credit Guarantees

In situations where your company is selling to an overseas firm (export) with which it has not done business, and where the overseas firm has not issued a letter of credit (in fact, they are asking you to give them 30- , 60-, or 90-day terms!), certain companies will issue either your company, your lender, your factor or your lessor a third-party guarantee of payment in full of your order within a certain period of time after it has either been shipped or after it has been delivered to your customer. These guarantees are indispensable in building up an international market for your products.

Asset-Based Lines of Credit

Asset-based lines of credit are generally secured by pledges of your company’s more substantial assets which are not already encumbered – usually such items as trucks, heavy machinery, real estate (if your company or a partnership comprised of your company’s principals owns it), inventory and accounts receivable. It is generally a senior lien against your company, more expensive than a simple bank loan, but is ideal for companies that are turning around, rapidly growing, have thin profit margins or do not have several consecutive years of profitability. These capital facilities are usually provided by finance companies which do not suffer the same stringent lending constraints as primary banking institutions. While these facilities are more expensive than bank loans, lines or revolving credit facilities, they tend to be less expensive than factoring or single invoice discounting arrangements, and on par with, or less expensive than leases.

Project Financing

Project Financing is a sometimes a complex affair, especially when it involves: multiple vendors, a foreign government agency or an overseas customer (as purchaser or lessee) and a completion period of several years. These financings usually involve a combination of credit guarantees or letters of credit, a multi-phased loan to be funded in installments based upon percentage completion or some other specified payout formula, and other “wrinkles.” In some cases, a smaller firm can secure a larger, more bondable (creditworthy) partner to strengthen the perceived viability of the transaction, or can coordinate the right combination of funding and guaranteeing parties. The TNNWC financing expert will coordinate all of this for you.

Other Financing

There are other types of financing and credit arrangements available. A TNNWC financing expert will help you sort out these additional options. While your TNNWC financing expert is not an investment banker, securities broker-dealer, a bank, fiduciary agency, insurance company, surety or a financial advisor……it is their mission to:
  1. Find you the optimal route to the financing that you need, and to
  2. Specifically bring you together with the right party or parties to accommodate you.
They work for you, and not for any suppliers of financing or guarantees. They use their experience and expertise, vigorous best efforts and contacts in order to be your advocate and ally. They treat your information with the utmost confidentiality. They will treat you with respect. Their success is your success in finding the financial options your need.

Show me the money!
So now that you have made it through this overview of alternate financing approaches you may be ready to take the next step. You can take heart that although the capital and credit markets are constantly changing, there are always some non-traditional providers in the marketplace which still provide financing and/or guarantees for relatively small, earlier-stage companies…..even when the banks and investment banking houses tighten the reins on extending credit, or become very "particular" about the loan or underwriting requests that they'll entertain. TNNWC’s Specialized Financing & Credit Enhancement Services specialize in finding genuine, willing participants to assist your emerging enterprise in fueling your growth. They work hard to minimize wasted time, trial-and-error, multiple submissions to multiple "sources," and a raft of application and processing fees to strangers, many of which are neither qualified nor interested in financing your company at all. TNNWC works to find you the quickest path to your financial solution. They value your time, your money and your trust.

So stop searching for change in the sofa…..put TNNWC’s Financing, Credit and Risk Management Services to work for your emerging enterprise by clicking on the button below for an Application Form. A modest application/evaluation fee will be required. It is a reasonable homage to pay to receive access to an experienced guide, alternative financial solutions, and kind consideration from your new “Best Friends in Financing”.

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The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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