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FINANCIAL rumors and financial facts Review financing options for your B2B business The world of commercial finance is complicated. It is proposed that all companies before they, with their trusted advisors (CPA, lawyer, or consult with partners) for each transaction in which funding will affect the long term impact on their businesses. The following statements are the opinions of the dictionary definitions here below on. Merriam-Webster Online Dictionary Abridged definitions: MYTH: Pronunciation: ‘mith Function: noun Etymology: Greek Myth 1 a: to take on a traditional story, as a rule of seemingly historical events that are part of the world view of a people or a practice, belief or natural phenomenon is explained. 2 a: a popular tradition, faith, or has grown up around something or someone, especially: one embodying the ideals and institutions of a society or segment of society 2 b: an unfounded or false notion FACT: Pronunciation: ‘fakt Function: noun Etymology: Latin factum, from the neutral factus, past participle facere 1: a done 2: the quality rather than actually 3 a: something that has actual existence 3 b: an actual occurrence 4: a piece of information, as presented, with the objective reality, in fact: in truth ”A fool and his money are easily separated” FINANCIAL MYTH: No. 1 Finance companies that promise to the funding in 24-48 hours are the best choice. Financial Fact: Unless you are desperate for funding, you should compare the time for alternatives, check out the proposed contracts for them, and consult your adviser. It is recommended that you read the proposed contract before the conditions are agreed to examine carefully and the risks related to the following questions: 1. Percentage may be driven: This can range from 60% to 90% of the nominal value of an invoice field. If the percentage advanced enough to help you grow profitably? 2. Work your obligation to comply with the finance company: Do you need to sell 100% of your debts each month, or you are authorized to sell at their own discretion? Is there a monthly minimum sales fees and if so would not you be suitable for the services of the commercial finance company to this degree to use every month? 3. Do you want to be more profitable if you use the funding of companies to provide services? In other words, you can afford to pay the fees of commercial funding to grow your business? 4. Which source is better for you a small business commercial finance, a large commercial finance company, or the asset based lending department of a bank? With the small business, you are more likely to work with decision makers and their generally more flexibility and discretion. With the large companies to reach larger transactions, and this can be of great importance, especially if your company is international. Banks are an excellent choice if your accounting is perfect and you are good at dealing with strict requirements. The banks are regulated institutions with safety and soundness requirements that banks in general more conservative than private lenders. GFS works with all three types of lenders. 5. Choice of Law: If you are in California and any dispute must be litigated in New York, you can afford the risk that you might go to protect your interests? Where there are disagreements or disputes to decide? There is binding arbitration? 6. Penalties for early termination: Some contracts stipulate that each year, if you want to leave the commercial finance company that you are suitable, “the greater of two percent (2. 00%) of the maximum credit line, or the number of remaining months of the agreement multiplied by the monthly minimum fee. ” Is the termination fee risk affordable? 7. Penalty interest if you pay a customer fails to timely provide: Some lenders, that if a client defaults, you can not substitute another bill, and collected as fees. Other lenders may require that if a customer will not pay an invoice within 90 days, you pay 20% of the invoice face value plus 7th 5% per month until payment is made. What does the commercial financing agreement required unless your customer to pay on time? ”Economical with the truth” If anyone economical with the truth, they can be information to create a false picture of the situation, without actually lying. FINANCIAL MYTH: No. 2 Finance companies that promise lower prices, are a better choice. For example, Co. “A” has 3% per month; Co. “B” 3 offers 25% per month. Co. “A” is the best choice. Financial Fact: Contract terms and conditions to determine your actual costs, if your customers to pay. This requires an analysis. It is recommended that you carefully examine the terms on how interest rates charged and your experience with how your customers usually pay the real cost of financing the project. Here are some examples: 1. They sell a bill with a face value of $ 100. 00. Take the contract fees of 3% for 30 days, with a 80% advance to you and your customer pays the commercial finance company the full amount due on 30 Day. Take a $ 80 00 advance on Day 1 and your customer pays the commercial finance company $ 100. 00 on 30th Day: Suppose v Lender “A” charges 1% for the 10-day period. Suppose, “payday” is replaced in the commercial finance contract at the time of payment from your finance company defined customer pays, plus ten (10) days. Ten working days are two calendar weeks. You will be charged for 44 days. One percent for the first 10 days, plus 4 percent for the next 34 days a fee equal to 5%. Your cost = $ 5 00. Suppose v Lender B charges “1 5% every 15 day period. Suppose, “payday” is in the commercial finance contract at the time the finance company receives the payment from your customers, plus three business days for check clearance. You will be charged for 33 days. It calculates 4th 5%. Your cost = $ 4 50. Suppose v Lender “C defines” payday “as the day they receive the check or wire transfer amount. This commercial finance company will stop the interest clock on the day of payment received by your customers. However, it will give you 3%. Your cost = $ 3 00. Suppose v Lender “D defines” payday “as the day progressed they receive funds and charges interest only on the actual day funds, also known as per diem interest. Since you will be charged 3% to $ 80. 00 Your Cost = $ 2 40. 2. In each contract, the definition of “payday” and the method of calculation of interest is crucial to the actual cost of financing must be anticipated. All of the above methods of calculation, unless Lender “A”, can adequately because of the risks in the transaction. Gregg Financial Services to obtain work at the most competitive rates and terms for the financing of our first customers, and reduce GFS works to commercial financing costs, as you grow. 3. If you have customers usually pay within 60-90 days, a contract that requires a minimum interest free for 60 days is not unreasonable. This condition can be a medical receivables financing. 4. Consider whether the commercial finance company will require the agreement that you will) sell each account (100% of all invoices on the day of your question it, or you can use the various accounts to sell up to 59 days overdue, according to your needs? There are disadvantages: lower prices vs. flexibility. It is very imposing, the question of evaluation of your commercial financing needs and your margins to cover the costs of the proceedings. ”Easier said than done” If something is easier said than done, it is much harder than it sounds. It is often used when someone advises you to do something difficult and trying, it sounds simple. FINANCIAL Myth No. 3 You can determine the best finance company to work with by simply comparing the different sites. Financial Fact: Web pages are advertising. Knowledge of the lender, their reputation and business practices necessarily choose with care. KEY points to note: Use when determining the most appropriate commercial finance company, make sure: • the provider is a reputable company • Your contract complies with any verbal or written quotes • Are you aware of any financial penalties if you want to terminate the agreement, • funding for credit limits are sufficient for your needs first • You have to read before signing the contract carefully, checking the level of funding, and notice periods • You understand all the terms and conditions, and the costs that you have to pay Commercial Finance Brokers work with many dedicated commercial finance companies and banks in several companies of all sizes. There are many areas of specialization, such as purchase order financing, accounts receivable financing, inventory financing and SBA financing. Most commercial financing companies limit their services to one or two of these categories. A commercial finance broker will evaluate other companies and to adjust with one, need the best for your business. They also keep a watchful eye on the commercial finance companies to calculate the non-competitive charges can not and will not be with you with them. In addition, compare prices, there are many points to note for the selection of services. To anticipate problems with its customers, which inevitably find out what level of customer service offering help to solve that problem. Do they have telephone support and personal meetings, e-mail support and live chat, or a combination of services? Choose the commercial finance company that provides several options to address reliability concerns or answers to questions. Imagine there are differences in where you are, and the time zone that is located in the commercial finance company. What impact will this cut off times for the financing? How might this affect your ability to achieve key to finance your representative? You can ask for a list of references before you do business with them. Make sure ask yourself such questions as: • Were they able to quickly process your funding? • Was the approval process easy? How long did it take? • Was the company easy access via phone and e-mail? • How long did it take before you received funds? • If you have a problem with your account, did what they do to solve it? • How do your customers react to the co-financing with commercial companies? Have they adequately deal with them? • Would the company? ”Face Value” If you take something at face value, you accept the appearance rather than deeper into the matter. FINANCIAL MYTH: No. 4 A non-recourse contract means you do not have to pay to pay the financing if your business, if there is a standard. Financial Fact: Most contracts require that you pay if your client files bankruptcy or goes out of business. There are two general types of factoring: recourse and non-recourse. Recourse factoring is the most common. With recourse factoring, commercial finance company is usually every invoice you submit for funding, but a refund plus their fees for accounts that do not need to be paid within a specified time, usually 90 days. Non-recourse factoring, your company may be exempted from any responsibility for unpaid invoices, if and only if it is really “non-recourse” without conditions. The commercial finance company with a non-recourse contract will have more stringent measures for the bills that they accept. In a non-commercial use contract finance company agrees to buy the account for you, and takes some or full responsibility for its payment. It depends on the contract. Credit insurance may be required. This is an additional expense. Non-recourse factoring is to be understood typically defines Commercial Finance contracts: If the customer does not pay in a few situations, it’s not your problem. For example, the customer should declare bankruptcy or to withdraw from the business you are responsible to pay back the commercial finance company for the advance on certain bills. But when it published a guarantee, if anything at all wrong with your product or service, you can be held liable for the payment you received. And the commercial finance company to a breach of the warranties and representations hold many in your contract as a defense to take responsibility for any loss that the non-payment in a non-recourse agreement. There are also commercial finance company, which is a mixture of the two available. These companies promise to accept the risk of your bills, but you need to to change a replacement of equal or greater value for slow or down-payment accounts. This is not a true “non-recourse” agreement in the literal sense of the idea, because you are committed to non-performing accounts with new accounts, which are expected to conform to. On the surface, sounds better than non-recourse solution. But if the fees for the non-recourse factoring are significantly higher than full mobilization, the additional costs to transfer the risk of payment default, the value of costs? How many of your customers will file for bankruptcy or go out of business? Over a longer period may cost you more of your potential profits to a certain risk to the payment of the commercial finance company transferred. Most commercial financing companies, which completely and without recourse factoring conduct extensive credit checks of customers before they pay an advance on an invoice. This is an advantage for all involved. If it is foreseeable that a bill to get paid by a creditworthy customer, the invoice will be acquired. This credit quality check is an advantage for you because you do not knowingly sell your products or services for companies that are not likely to pay. On the other hand, it may prefer companies that you would not meet with the company doing the credit for non-recourse factoring. It can turn compelling business reasons for the choice vs. non-recourse factoring. ”Do not worry about the coins and the pounds will look after themselves.” If you look after the pennies, the pounds will look after themselves, which means that waste, if someone makes sure not to small amounts of money, they will accumulate capital. ”Hook, line and lead” If someone believes something or accepting a hook, line and sinker, they take it completely. FINANCIAL MYTH: No. 5 Start-up company with a new hot product need venture capital to grow rapidly. Financial Fact: You can grow exponentially with the order financing, factoring, inventory finance and financing from a commercial company. In general, more products you sell, the higher your revenues and profits. The more orders you have, the more you can sell, provided you can pay your supplier upon delivery. Order financing such as inventory financing of goods in transit to your customer. Commercial Finance offers businesses purchase order financing to pay your suppliers, allowing you to close the sale of your orders and deliver to your customers. This often involves a letter of credit with commercial finance company’s loan payments to the factory for the manufacture of the product, especially if the production facility in the U.S. is not guaranteed. If the goods from your customers, a demand is created recognized. An invoice factor or commercial finance company that buys debts, pay for the order financing. You are paid out of the profit when your customer pays. The commercial financing structure can follow these steps: Guarantee letter of credit (the manufacturer pay for the goods) pays ► Order Financing (Manufacturers / Suppliers) ► Accounts Receivable Financing (pay order financing) Inventory Financing ► ► ► The customer pays factor is paid ► They are paid profits from the sale will be paid after financing costs Commercial Finance Brokers can help you determine what financial resources are available, depending on the circumstances at competitive prices. ”Play Hard Ball” If someone plays hardball, they are very aggressive in trying to reach her goal. Venture Capital Funding The Venture Capital Industry: Venture capital is money provided by professionals who invest alongside management to develop in young, rapidly growing companies that have the potential of significant economic contributors. Venture capital is an important source of equity for start-up companies. Professionally managed venture capital firms generally are private partnerships or closely-held companies through private and public pension funds, foundations, corporations, wealthy individuals to finance, foreign investors and the venture capitalists themselves Venture capitalists generally: • Finance new and rapidly growing companies; • Purchase shares; • To support the development of new products or services; • Add the value of the company through active participation; • Do not take more risk with the expectation of higher wages; • Do you have a long-term orientation When considering an investment, venture capitalists carefully screen the technical and business benefits of the proposed company. Venture capitalists invest only in a small percentage of the companies to review it and a long-term perspective. Going forward, it contributes actively to the management of the company, their experience and business acumen gained working helping other companies with similar growth challenges. The advantage of venture capital is that it makes money, you could expand your business and gain market share before someone suggests you get. Venture capital is not a loan must be repaid, but rather, venture capitalists (VCs) invest their money in exchange for equity (an ownership share) in your company. VCs get their money only if your company is acquired by another company or goes public, that is, if their shares are publicly traded on an exchange. The disadvantage is that you are no longer the sole owner of your company and can lose control. In addition, a VC can be your company’s move towards an Initial Public Offering (IPO) of publicly traded shares more quickly than is best for the long-term health of the company. In general, the earlier the stage, where you will receive financial support, the more you have to give up. A few venture capital companies, or “angel investors” were able to invest, which is not a real operating business, but only a concept. For $ 500,000, they could take a 60% stake in the company, and put in their own management team. If she can decide that such a profitable business (proof of concept “), they could finance the company for another 5 million U.S. dollars, with more equity. By the second round of financing, could retain the original supplier only 5% to 10% foreign ownership. What are the pros and cons of taking venture capital funding as a partner? Pros: - Financial strength to compete globally - Share buyback opportunity - Easier to be listed on an exchange - No conflict of interest - VC network is to increase the company’s business VC’s have experience, advice and support. It is objective, useful, with networking and hiring the right people. They add credibility and prestige to your business and share the risks and ultimately helps to sell the business. Cons: - Loose part of the ownership - Can not succeeded in the company as a family business The risk of working with a VC can concern is for a profitable exit and mandatory, in comparison to your concern for your employees and customers. You lose the independence to manage your business and the VC’s to the right, you and your management team fire. It can be a full-time job at the venture capitalists that manage your business the financing. Venture capitalists usually after you ask: • Anti-dilution protection. If the company the share price falls any time in the future, they get additional free shares. • Dividends. In addition, they receive a guaranteed return. • Liquidation preferences. VCs get their principal and dividends back before anyone else gets a penny. • Participating preferred. You get to double dip them first on their investments and dividends, then the value of their shares. • Mandatory redemption. This commits the company to buy back their shares at a specific time, a deadline for an exit event. • The demand registration rights reserved. The VCs can force the company to submit a registration statement with the Securities and Exchange Commission to launch an initial public offering another method to an exit event. • Authorization rights reserved. The VCs have to approve any new funding and have the right to participate. • Reps and warranties. You also have the personal liability for representations, you have to accept on the major aspects of society. You have the right to give you for everything you have forgotten even if you sue them bad news. CONCLUSION: There are no easy choices. If you have orders for your product with a sufficient gross margin may, commercial finance companies are your best choice. If you are to your product and lack capital to finance your business to develop to develop a product to get your brand and marketing contracts, venture capitalists may be the best thing that ever happened to your business. If you bind a commercial finance company, you can terminate the contract. If you commit to a venture capitalist, is the exit strategy in their area. ”Make a mint” If someone makes a mint, they are therefore a lot of money. ”Feel the pinch” If someone money or feeling restricted just in a different way they are perceived. FINANCIAL MYTH: No. 6 All finance companies entitled to interest on 100% of the nominal value of the invoices that you sell them. Financial Fact: Some fund companies base their fees only on the actual amount you receive. There are a variety of prices in the commercial finance business. Although competition tends to hold down prices, different industries more calculated on the basis of historical responsibility. For example, his medical receivables financing and building more expensive than commercial financing for a temporary employment agency. On the one hand, some require commercial finance company that sells 100% of the accounts and pay interest on 100% of the bills. This makes sense because the business with high risk, and if your company goes bankrupt, can gather, the commercial finance company, none of the funds that have paid in advance, too. The best amount is available, calculated with reference to the actual funds advanced, with interest on a daily basis for the period the funds will be used. This is called daily interest. Most banks and some commercial finance companies offer this option, described as a “line of credit” or “Asset-Based Finance for larger transactions. Suppose a commercial finance company charges a monthly fee of 3% and you sell a bill for $ 100. 00. Suppose further that you will pay customers in 5 days. Here is a series of costs that would pay you, based on different minimum contract period and payment terms: On the basis of 100% of the bill: Minimum 59 days = $ 6. 00 Costs Minimum 30 days = $ 3 00 Costs 15 days minimum = 1 $. 50 Costs 10 days minimum = 1 $. 00 Costs Per Diem Interest 5 days = $. 41 Costs On the basis of a 80% deposit per day for 5 days = $. 33 ”Leave no stone unturned” If you are looking everywhere to find something, or try everything to achieve something, you can no stone unturned. ”Game Plan” A game plan is a good strategy FINANCIAL MYTH: No. 7 A finance contract has no term with more than one contract with one year term. Financial Fact: If you need financing for a year and prices and rates are lower, the one year contract may be a better choice. ”Keep your options open” If someone is keeping its options open, they are not going to exclude or restrict themselves to any course of action. FINANCIAL MYTH: No. 8 SBA business loans can be similar at every bank. Financial Fact: Some banks are SBA commercial loans, with delegated authority. This allows the additional funding needs for order, accounts receivable and inventory of third-party lenders to create more capital for growth. ”Put all your eggs in one basket” If you put all your eggs in one basket, you risk everything for an opportunity that could break like eggs to go wrong. FINANCIAL MYTH: No. 9 All finance company, terms and conditions are similar. Financial Fact: General range from fair to expensive. When you factor accounts that you transfer all of your cash flow, a commercial finance company. ”Comfort Zone” It is the temperature range in which the body does not shiver or sweat, but has an idiomatic sense of the place where people feel at ease when they avoid the troubles of the world. It can be physical or mental. FINANCIAL MYTH: No. 10 All finance companies require that your customers aware that you have with them. This is seen as reporting and verification. Financial Fact: Some fund companies have to notify factoring. This makes financing more transparent to your customers. ”Dare to leap” If you take the plunge, you decide to do something or commit yourself, although you know there is an element of risk. Submitted by: Gregg Elberg, President GREGG FINANCIAL SERVICES 930 Irwin Street, Suite 209 San Rafael, CA 94901 415-482-9221 415-482-9228 Fax 415-847-8434 Cell Gregg @ gregg financial services. com Gregg Financial Services is a full service brokerage for commercial finance companies and banks that fund manufacturers, distributors, assemblers, jobbers, importers, personnel, services, agribusiness, construction and healthcare companies. We buy for the lowest prices and conditions. We organize different types of financing including purchase order financing, factoring, factoring with an inventory component and asset-based loans on receivables, inventory, equipment and machinery. GFS also provides cash flow financing and SBA loans on real estate and facilities. We work with all industries and can arrange financial transactions in the U.S. and Canada, Mexico, Australia and some areas in Europe, including Britain, Ireland, France and Poland. JRC organized the financing of $ 25,000 to $ 50 million at competitive prices, and we are working to reduce your financing costs as your company grows. For more information about GFS, please visit our website: www. gregg financial services. com Copyright 2006 Gregg Financial Services.

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