1 / 14

Hampton Roads Association for Financial Professionals

Hampton Roads Association for Financial Professionals. December 14, 2010. Borrowing 101. A high level overview of why companies borrow and how they go about it.  Tips to help navigate where to turn, and what should be provided. Confidential – For Discussion & General Information Purposes Only.

hanae-barron
Télécharger la présentation

Hampton Roads Association for Financial Professionals

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Hampton Roads Association for Financial Professionals December 14, 2010 Borrowing 101 A high level overview of why companies borrow and how they go about it.  Tips to help navigate where to turn, and what should be provided. Confidential – For Discussion & General Information Purposes Only

  2. Who borrows? Wide variety – type, size, credit profile • Public & Privately held • Government, Institutional, Non-Profits, Banks... • Start ups – early stage – emerging • Established – growing • Challenged – difficult times / cyclical, economic, industry • Event driven – ownership changes, mergers and acquisitions, buyouts

  3. Why do companies borrow? Short term needs • General working capital • Seasonal • To fulfill large orders • Dividends / distributions / taxes • Liquidity Long term needs • Capital expenditures • Technology equipment • Plant / distribution machinery & equipment • Real estate • Research and development • Expansion • Liquidity

  4. Capital Structure Basics: Debt vs. Equity Assets – Liabilities = Equity Investors • Owners • Public / shareholders • Cooperatives – members • Angel • Mezzanine • Private Equity Groups Equity • Owners’ equity or members’ capital • Retained earnings • Mezzanine / Junior Capital • Subordinated Debt

  5. Borrowings: Term, Tenor, Type • Secured vs. Unsecured • Collateralized / Cross-Collateralized • Structures • Revolving Lines of Credit • 364 day, 1 year, 2 year, 3 year, + • Borrowing base, non borrowing base • Term loans • 5-7 year • Loan to values, advance rates, formulas • Lease vs. Loan: obsolescence, tax impact, reporting • Mortgages • 10, 15, 20 year amortizations, bullets • Senior Notes / High Yields / Bonds • IPOs / Secondary Offerings • Tax Exempt Financing / Special Programs

  6. Borrowings… • Guarantors • Affiliated companies, parent companies • Owners • Collateralized guarantees • Covenants • Liquidity: earnings or profits, CA/CL, cash or excess availability • Net worth: tangible net worth • Leverage: TL/NW, D/TNW, Sr Debt / EBITDA • Coverage: Interest, Fixed Charge Coverage

  7. Time to Borrow: Starting Point Self Assessment • Amount needed • Sources – collateral, cash flow, other • Uses – What will proceeds be used for, and over what time period? • Financial statement condition • Business trends, outlook • Owner plans long term / strategy

  8. Time to Borrow: Where to Turn • Banks: local, regional, national, global • Commercial finance companies • Specialty lenders • Equipment finance providers • Factors • Asset based lenders • Purchase order finance providers • Investment bankers • Government backed programs / SBA

  9. Time to Borrow: Where to Turn (continued) • Trusted advisors – CPAs, Attorneys, Bankers • Other companies – referrals / testimonials • Industry associations • Signs / Media • Internet

  10. Be prepared: Questions Asked Company structure Ownership Key management team History Locations / domestic, international Operations: buys from, sells to, processes (sales, mfg, delivery) Internal vs. external contributors Contracts, Bids Financial performance / trends / past and future Competitors Differentiation / Niche / Strengths Weaknesses Outlook / strategy

  11. Be Prepared: Information Requested • You may be asked to provide: • Financial statements: 3 years, 4 years, more • Budgets or projections: 1 year or more, monthly/quarterly • Tax Returns • Personal financial statements: owners / principals • Top customers • Accounts Receivable • Accounts Payable • Inventory • Machinery & Equipment • Real estate / Locations • Appraisals

  12. Be Prepared: Ongoing Reporting Requirements • You may be asked to provide ongoing: • Financial statements – monthly, quarterly, annually • Financial statements preparation – compiled, reviewed, audited (firm utilized) • Covenant compliance certificates - monthly, quarterly • Borrowing base certificates - daily, weekly, monthly, quarterly • Asset listings / verifications • Collateral reports • Field exams / collateral audits or appraisals

  13. Be prepared: Questions to Ask • Fit / Match • Ability to address need • Culture, institution • Short term or long term solution • Solution Analysis • Is need provided for • What costs are involved • Can company continue to meet requirements: whether reporting, management interaction, covenant compliance • Approval Process • Steps involved • Who approves: signatures or committee • Timing • Closing Process / Funding • Documentation • Appraisals, Other • Timing

  14. Questions & Answers Susan L. Miller Vice President, Regional Business Development 804-697-6748 Office / 770-235-4488 Cell Susan.l.miller@wellsfargo.com Wells Fargo Bank, N.A. Eastern VA Regional Commercial Banking Office 440 Monticello Avenue, 11th Floor Norfolk, VA 23510-2372

More Related