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Course Title Presented by Alan Friedman & Daniel Jobe Friedman, Kannenberg & Company, P.C. Objectives Commentary on the current financial crisis and its effect ... – PowerPoint PPT presentation

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Title: Course Title


1
"Selling Yourself to the Bank"
Course Title
(Sure Ways To Get Financing)
Presented by
Alan Friedman Daniel JobeFriedman, Kannenberg
Company, P.C.
2
Objectives
  • Commentary on the current financial crisis
    and its effect on banking and borrowing
  • 10 Time-Tested Tips to consider when applying
    for a bank loan
  • A sure-fire bank presentation template to
    bolster your chances of getting that loan
  • Q A

3
Current Banking Financial Crisis
4
How Did This All Start?
5
2007 2008
  • HSBC (worlds largest bank) declares billions in
    sub-prime mtg losses
  • Bear Stearns fails Lehman Brothers files for
    bankruptcy
  • Fannie Mae Freddie Mac put into conservatorship
    by U.S. Treasury
  • Fed Reserve bails out AIG, world's largest
    insurer
  • Washington Mutual, the largest U.S. thrift, fails
  • Bank of Americas profits drop 68 sell stock to
    raise 10 billion
  • Swiss government coughs up 59 billion to bail
    out UBS
  • Congress passes 700 billion bail-out for
    Citigroup Automakers
  • Stock market plummets, former NASDAQ exec
    Bernie Madoff steals 50
    billion

6
2009
  • AIG announces a 61.7 billion loss for the 4th
    quarter of 2008 the largest business loss ever
    posted in U.S. corporate
  • Microsoft sales drop for the 1st time in 23 years
  • U.S. travel down by 30 KPMG sued for 1 billion
    dollars
  • California leads 48 states in fiscal budget
    crisis
  • U.S. Unemployment hits 10 (up from 4.9 in 2007)
  • Bernie Madoff goes to prison for 150 years, his
    CPA is arrested for securities fraud, and
    JPMorgan is sued for handling funds
  • Chrysler General Motors file for bankruptcy
  • Personal Savings Rate hits all-time high of 6.9
    in May

7
2010
  • June 22, 2010 Moodys reports Bank profits
    have shrunk to unprecedented levels due to
    write-offs of 436 Billion in bad loans.
  • July 16, 2010 Businessweek reports Bank of
    America, the largest U.S. lender, fell as much as
    7 percent in New York trading after the company
    posted lower profits and revenue amid an economy
    thats muddling along.
  • October 21, 2010 Federal Housing Finance Agency
    says Government-backed funds may need further
    aid over bad mortgage losses and warns U.S.
    taxpayers that Fannie Mae and Freddie Mac may
    need 363 Billion more in bailouts.
  • December 31, 2010 Alan Friedman buys a brand
    new, 100-watt, all-tube,
    3-channel guitar amp to stimulate
    the economy.

8
Whats next???
9
Why banks are nervous
  • Consider what banks put at risk to make a return
    of profit (a.k.a. the spread)
  • Receivables go bad, inventory has feet
  • Even real estate (often considered the best
    collateral) has evaporated in value, often below
    corresponding mortgages

10
What the bank wants from you
  • The 3 Cs credit, character collateral
  • Credit the proven financial ability to cash
    flow (pay off) the loan
  • Character the financial knowledge to run your
    business profitably, and the trustworthiness to
    retire the debt
  • Collateral an alternate way to pay the debt in
    the event of a default

11
10 Tips to Getting that Loan
  1. Banks need to make loans so dont be afraid to
    ask for one
  2. Do your homework research banks
  3. Be prepared with Financial Statements, Tax
    Returns,Business Plans,Forecasts,etc.
  4. Walk in with basics anticipate questions
  5. Dress to impress and for success

12
10 Tips to Getting that Loan
  1. Dont be negative or apologetic be confident
  2. Keep it real dont stretch the truth
  3. Discuss risks (it earns credibility)
  4. Dont push it
  5. If at first you dont succeed,

13
DJ's House of Rock, Inc.
Loan Request Presentation to
Haywood Jalendmie, V.P.
Last National Bank of Hartford
14
Discussion Points
  1. Loan request proposed loan terms
  2. Background on DJs House of Rock
  3. Background on music retailing industry
  4. Background on rental programs
  5. Why we are seeking a bank loan
  6. Financial documents we are providing
  7. Available collateral and security

15
1. Loan Request Proposed Terms
  • 200,000, 5-year (60 month) fully amortizing note
    at 8 interest per annum
  • Loan needed for acquisition of band orchestral
    rental instruments
  • Funding Needed by April 1, 2011

16
2. Background information on DJs House of Rock
(DJs)
  • DJs is a single store, full line music
    retailer located in Hartford, CT
  • DJs is an S Corporation, owned and operated by
    Alan Friedman Daniel Jobe
  • DJs occupies 6,000 sq/ft of retail space on Main
    Street in downtown Hartford, CT

17
3. Background information on the Music Retailing
Industry
  • There are approximately 7,500 musical instrument
    and product retailers in the U.S. Most of these
    stores are family-owned businesses only one
    (Guitar Center with Music Arts and Musicians
    Friend divisions) has a true national presence
  • There are 5 types of music retailing designations
    (full line, keyboard, school music, MI/combo
    print), each one having unique financing issues
  • Key profit centers for most music stores include
    sales, rental, music lesson and repair
    activities

18
4. Background information on Instrument Rental
Programs
  • Many full-line and school music retailers rent
    musical equipment, primarily band and orchestral
    instruments, under a rent-to-own type of
    agreement. This agreement allows a customer to
    rent a band or orchestral instrument on trial
    basis, instead of being forced into buying their
    child (a school music student) an instrument they
    may not enjoy playing or continue with shortly
    after the instrument is bought.
  • DJs is a retailer that provides these types of
    rental agreements, and has been doing so since
    1995.

19
4. Background information on Instrument Rental
Programs
  • Under the Companys rent-to-own agreement, a
    customer signs a contract to rent a musical
    instrument for a period of time up to 36 months.
    Title to a rented instrument passes to the
    customer if when the final contracted payment
    is made.
  • Until the final payment is made, (1) title
    remains with the Company, (2) all payments
    received by the Company under the rent-to-own
    agreement are recorded as rental income, and (3)
    the rental assets are depreciated over their
    useful life (usually 3 years, in accordance with
    tax reporting rules).
  • Upon receipt of the final payment, the Company
    removes the related rental asset cost and
    accumulated depreciation from their accounts and
    any resulting difference is reflected in cost of
    goods sold.

20
4. Background information on Instrument Rental
Programs
  • The Companys rental agreements comply with
    Internal Revenue Code Rev.Proc. 95-38.
    Accordingly, these contracts provide for level
    rental payments which, in the aggregate, do not
    exceed 10,000, but do exceed the normal retail
    price of the rental asset, plus interest.
    Additionally, these contracts do not extend
    beyond 36 months and there is no legal obligation
    for the customer to make all of the payments set
    forth in the contract.
  • At the end of each monthly rental period, the
    customer may either continue to use the property
    by making the next rental payment via
    auto-deduction or check, or return the rental
    asset to the Company. If the rental asset is
    returned, the customer has no further obligation
    under the contract and is not entitled to the
    return of any rental payments previously made.

21
4. Background information on Instrument Rental
Programs
  • On December 31, 2010, DJs had 3,000 instruments
    in their rental pool at a total cost of
    1,000,000, along with 800,000 of accumulated
    depreciation, resulting in a net book value of
    200,000. These instruments have been
    depreciated over an accelerated 3-year MACRS
    depreciation method for both book and income tax
    reporting purposes.
  • On December 31, 2010, DJs has over 2,000,000 in
    future contracted rental income on its
    outstanding rental pool, and has historically
    experienced a 25 return rate each year. Because
    of the quick depreciation taken on its
    rent-to-own instruments, the Company believes the
    fair market value on the rental pool is
    substantially higher than the net book value
    reported on the 12/31/2010 balance sheet.

22
5. Why We Are Seeking a Bank Loan
  • DJs has contracted two new school districts
    which represent approximately 500 new students
    who wish to join school sponsored band and music
    programs and will need to rent band orchestral
    instruments
  • Based on the lucrative nature of rental
    instrument programs (that also spur related
    accessory sales and instrument repairs), we would
    like to expand our instrument rental pools to
    meet expected customer demand for the 2011-2012
    school year
  • Given the time lag between payments to vendors
    for these instruments and receipt of the monthly
    rental income once they are rented, there is an
    imperative need for bank financing of our rental
    pools.

23
6. Supporting Documents Provided
  • Product Invoices from our Band Orchestral
    vendors
  • Compiled Financial Statements of DJs for the
    years ended December 31, 2008, 2009 2010
  • December 31, 2010 Personal Financial Statements
    for the store owners Alan Friedman Daniel Jobe
  • Updated 2011 Business Plan
  • 5-Year Forecast of Income, Expense and Cash Flows
    for the years ending December 31, 2011 - 2015
  • NAMM 2009 Cost of Doing Business Survey
  • Music Trades Annual Report of Top 200 Dealers,
    and
  • MMRs Profile of the American Music Dealer

24
7. Collateral Available
  • All corporate assets, including fixed assets,
    accounts receivable and inventory (other than the
    inventory specifically pledged to specific
    suppliers and/or floor plan finance companies)
  • Personal guaranty of Friedman Jobe
  • Alans primary residence (200,000 of equity)
  • Daniels vacation home (150,000 of equity)

25
8. For additional information contact
Alan Friedman Daniel Jobe, Officers DJs House
of Rock, Inc. 4-12 Marshall Stack
Street Hartford, CT 06105 Tel (800)
867-5309 Fax (800) 123-4567 Web
www.djhr.com Email info_at_djhr.com
26
Top Three Takeaways
Here are three takeaways from Selling Yourself
to the Bank presented by Alan Friedman Daniel
Jobe. Bring these ideas to back to your business
and see what results you generate! Takeaway 1
Master the Three Cs of borrowing Takeaway 2
Generate current financial statements Takeaway
3 Download this PowerPoint at www.fkco.com
27
Any Questions?
28
Free Consulting Meetings
Contact Jen outside the Idea Center
entrance after this session to set up a meeting
time
29
Enjoy the Show!!
Catch Printz Saturday Night at the Hilton Lobby!!
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