Small Business Finance Panel David Mitchell, Sr. VP, Action Capital Helen Thompson, Director of Operation, True North Equities Robert Luby, Managing Director, True North Equities Robert Mocerino, VP, Director, Sterling National Bank - PowerPoint PPT Presentation

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Small Business Finance Panel David Mitchell, Sr. VP, Action Capital Helen Thompson, Director of Operation, True North Equities Robert Luby, Managing Director, True North Equities Robert Mocerino, VP, Director, Sterling National Bank

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Title: Small Business Finance Panel David Mitchell, Sr. VP, Action Capital Helen Thompson, Director of Operation, True North Equities Robert Luby, Managing Director, True North Equities Robert Mocerino, VP, Director, Sterling National Bank


1
Small Business Finance PanelDavid Mitchell,
Sr. VP, Action CapitalHelen Thompson, Director
of Operation, True North EquitiesRobert Luby,
Managing Director, True North EquitiesRobert
Mocerino, VP, Director, Sterling National Bank
2
AGENDA
  • Understanding Non-Traditional Funding Sources and
    Alternative Forms of Working Capital
  • David Mitchell
  • TNE Services Overview and Lessons Learned
    Helen Thompson Robert Luby
  • Alternative Financing Opportunities for
    Government Contractors
  • Robert Mocerino
  • Questions

3
Understanding Non-TraditionalFunding Sources and
Alternative Forms of Working Capital
ACCESS TO CAPITAL is the KEY to Your Companys
SUCCESS!
4
WHAT EVERY SMALL BUSINESSLEADER NEEDS TO KNOW!
  • One of the most important jobs of a CEO running a
    small to medium sized business is to make sure
    the company acquires and maintains the proper
    working capital to operate and grow. Access to
    working capital is the LIFE BLOOD of a company,
    especially when a business is either growing TOO
    RAPIDLY or having GROWING PAINS. As the leader,
    it is your job to make sure your company has
    ACCESS TO CAPITAL, because being without could be
    the difference between FAILURE or SUCCESS. In my
    20 years in finance, Ive worked in almost every
    capacity in this industry other than taking a
    company public or trading stocks and bonds. In
    that time, I have watched many CEOs stumble and
    fall when faced with the notion of needing to
    borrow money. Because most have a LIMITED
    knowledge of the capital markets, and virtually
    NO understanding of alternate forms of capital,
    they normally run straight to their BANK when in
    need of working capital. In the case of small
    and medium size businesses, that move typically
    and immediately puts their company in JEPORDY.
  • HERES WHY? As someone who has spent 14 of my
    20 years working for some of the largest
    commercial banks in the country, I have learned
    ONE undisputable FACT Banks dont lend money
    to START UPs, or companies growing too SLOW, or
    too FAST! A CEO that does not understand this
    SIMPLE FACT has just put their companys
    OPPORTUITIES, GROWTH and FUTURE at RISK! The
    best CEOs maintain a keen understanding of whats
    available in the capital markets. They also
    maintain relationships with non-traditional
    lenders, and ALWAYS know where capital can be
    found when traditional banks say NO, or NOT NOW!
    Over the entire life cycle of your company, the
    form of capital your business will need will
    continue to EVOLVE. Understanding
    non-traditional and alternative forms of capital,
    will be KEY to your company's success. Most
    companies FAIL by chasing a bank for working
    capital, when the right financing partner at the
    time is NOT a BANK! Knowing where to find
    alternative sources of capital, whether within
    the industry they serve, or from a non-bank
    financial institution operating in the open
    market, successful CEOs know how to find the
    working capital they need to GROW! The BEST
    business leaders recognize how to find the RIGHT
    CAPITAL at the RIGHT STAGE of their company. As
    a business leader, the question you have to ask
    yourself is DO YOU?

5
Sources of Operating CapitalSource of Capital

Relative Cost
  • Equity from Principals or Outside Sources
  • Mezzanine Debt
  • Factoring and PO Finance Companies
  • Action Capital (A/R Finance Company)
  • Specialty Debt (Leasing, SBA, etc)
  • Traditional Bank Debt
  • Extended Trade Terms
  • Normal Trade Terms
  • Highest Cost
  • Lowest Cost

6
Comparison of Working Capital Products
  • Traditional Bank Line of Credit
  • Least expensive source of working capital 5-7
    APR
  • Requires CPA prepared financials showing
    historical profits and low debt to worth
    ratiosno startups or young companies
  • Prefers hard assets like R/E or equipment as
    additional collateral
  • Can Be Lengthy Approval Process (3 weeks to
    several months)
  • Advance Rates 70-80 on A/R
  • Requires expensive independent onsite audit prior
    to closing
  • Attorney cost and closing fees
  • Annual contracts with commitment fees
  • Additional cost for Lock Box and Monitoring
    Service
  • Little or no verification on Invoices
  • Limited knowledge of government receivables
  • Requires Owner Guarantees
  • Accounts Receivable Based Line
  • Action Capitals Credit Product!
  • Cost is 14-17 APR broken down into an interest
    cost and processing fee. Example Prime 2 plus
    1 monthly fee on net amount borrowed.
  • Internal financials statements required and/or
    tax returns
  • Only collateral taken is accounts receivable
  • Approval and closing in less than a week.
  • Advance Rates 90 on A/R
  • Advances against unbilled revenue
  • Companies with losses, customer concentrations,
    tax liens, start-up, high or slow growth and in
    bankruptcy are OK
  • Review credit quality of the companys customers
    and require change of address notification
  • No closing cost or long term contracts
  • Little or no verification on individual invoices
  • Free Lock Box Service
  • Strong knowledge of the government market
  • Requires Owner Guarantee
  • Factoring
  • Cost is 20-30 APR with a discount on the face
    amount of the invoice and a per diem on balance
    advanced
  • Internal financials required and/or tax returns
  • Only collateral taken is Accounts Receivable
  • Approval and closing in two weeks
  • Advance Rates 90 on A/R
  • Companies with losses, customer concentrations,
    tax liens, start-up, high or slow growth and in
    bankruptcy)
  • Typically one year contract with minimum fees and
    out of pocket closing fees.
  • Focus on each individual invoice with up front
    confirmation, stamping with notification stamp,
    mailing of invoice and collecting invoice. High
    notification level to customers.
  • Knowledge of the government market varies based
    on the factoring company
  • May or may not have Owner Guarantees

7
Businesses That Typically Need Alternative Forms
of Working Capital
  • Companies Without Assets like Real Estate, Land
    or Equipment
  • Companies that are Start Ups, Early Stage or High
    Growth
  • Large Customer Concentrations
  • Unusual Large Product Order
  • Company is consistently Beyond its Credit Terms
    with Banks Vendors
  • Companies that are Constrained by Current Lender
    (Bank Wont Increase Their Line of Credit)
  • Companies that are in Turn Around Situations
  • Sudden Change in Financial Performance (Decreased
    Revenues or Recent Losses)
  • Companies in the Workout, Special or Criticized
    Asset Group within their Bank

8
Industries Sectors That Typically Need
Alternative Forms of Working Capital
  • Services and Professional Services Firms
  • Government Contractors
  • Distributors and Re-sellers
  • Out of Favor Industries (Trucking, Printing,
    Services to Real Estate or Construction Firms)
  • Companies looking for Supplier Diversity
    Opportunities

9
Who is Action Capital Corporation?
  • Action Capital Corporation is one of the nation's
    largest and oldest independent finance companies.
  • Founded in 1959 and headquartered in Atlanta,
    Georgia
  • Strong leadership team with diverse backgrounds
    in investment, corporate and commercial banking
  • We specialize in accounts receivable financing to
    US-based companies.
  • We finance trade receivables from federal, state,
    and local government agencies, or large
    creditworthy businesses.
  • We have expertise in serving all industries,
    including service companies, distributors,
    staffing, and manufacturers.

10
What Can Action Capital Provide?
  • Accounts Receivable based Lines of Credit up to
    5,000,000
  • Funding needs can start as low as 50,000 per
    month
  • Advance Rates up to 90 against Billed A/R
  • Advances Rates up to 85 against Earned and
    Unbilled A/R
  • Competitive Rates and Fees charged on the Net
    Amount Advanced

11
Lets Partner!
David Mitchell Senior Vice President Director of
Marketing and Business Development
David_at_actioncapital.com 404-809-5419 Cell Becky
J. Cronister President Becky_at_actioncapital.com Pa
trick A. Thom Executive Vice President Patrick_at_act
ioncapital.com Phone 404-524-3181/800-525-7767
Fax 404-577-4880 230 Peachtree Street, Suite
910, Atlanta, Georgia, 30343 www.actioncapital.com

12
TNE Services OverviewandLessons Learned
13
Mission and Vision
Mission
We provide a full range of services to members
companies and clients to help them realize
full-growth potential.
Vision
Grow exceptional companies in the Intelligence,
Healthcare, Aerospace Defense, Homeland
Security and Transportation Logistics industry
sectors, striving to benefit all stakeholders.
14
Member Companies
15
Our Services
16
Business Development
End-to-end business development support services
aimed at developing and implementing growth
opportunities.
  • Service elements
  • Relationship Building
  • Federal Business Readiness Assessment
  • Solution Validation
  • Go-to-Market Planning
  • Sales Channel Development
  • Thought Leadership
  • Account Planning
  • Pipeline Development and Maintenance
  • Pre-RFP Support
  • Opportunity Analysis and Validation
  • Strategic Recruiting
  • Benefit from
  • Reduce barriers to entry
  • Shorten sales cycles
  • Industry knowledge transfer
  • Why us?
  • Decades of industry experience
  • Over 1B in Federal sales captured
  • Robust BD methods and infrastructure

17
Capture Management
Capture planning, gap analysis, win themes
development, pricing support, red team reviews
and several other targeted services to support an
effective capture effort.
  • Service elements
  • Capture Plan Preparation
  • Strategic Capture Recruiting
  • Gap Analysis
  • Competitive Analysis
  • Teaming Strategy and Formation
  • Call Plan Development
  • Contract Vehicle Identification
  • Win Themes Development
  • Price-to-Win Analysis
  • Bid Proposal Planning
  • Red Team Preparation and Facilitation
  • Final Contract Negotiation Support
  • Benefit from
  • Higher win rates
  • Proven lifecycle approach
  • Decades of experience
  • Why us?
  • Asset-based approach
  • Repeatable processes
  • We win

18
Proposal Review Preparation
Clients receive expert support from our
experienced proposal preparation teams. These
teams provide all services necessary to ensure a
fully compliant and highly competitive proposal.
  • Service elements
  • Compliance Matrix Development
  • Proposal Plan Development
  • Proposal Writing
  • Proposal Editing
  • Graphics Support
  • Benefit from
  • Reduce internal resource burden
  • Increase proposal throughput
  • Compliant, competitive proposals
  • Why us?
  • Experienced proposal team
  • Asset-based approach
  • Proven track record of success

19
Shared Services
Management of all non-core support functions,
enabling our clients to focus more time and money
on revenue-producing activities.
  • Service elements
  • Finance Support Services
  • IT Management
  • Back Office System Support
  • Expense Management
  • Timekeeping Management
  • Human Capital Management Support
  • Benefit from
  • Re-focus resources on high value activities
  • Scalable infrastructure
  • Compliance with Federal laws and regulations
  • Why us?
  • Decades of experience
  • Ease of switch-over, use and visibility
  • We understand the details

20
Finance Support Services
Clients receive expert support from our
experienced finance support team. These teams
provide all required services including payroll
processing, financing and invoicing.
  • Service elements
  • Payroll Funding
  • Asset Based Lending
  • Factoring
  • Lines of Credit
  • Back Office Support
  • Benefit from
  • Reduce internal resource burden
  • Efficient payroll processing
  • Improved cash management
  • Why us?
  • Experienced team
  • Industry leading tools
  • Proven track record of success

21
What We Have Learned - Acquisition
  • Acquisition
  • Valuation difficult to ascertain or greatly
    over-valued
  • Weak support structures
  • Founders/Leaders working on the wrong things
  • Business development weak always a goal, no
    concrete actions
  • Little to no real pipeline
  • Weak relationships close teammates not real
  • No writing talent
  • Verify quals, document quals,
  • Verify relationships
  • More discipline needed on follow-ups and
    opportunities
  • Operating agreements
  • Employment agreements

22
What We Have Learned Acquisition (Cont.)
  • Acquisition
  • Previous teammates
  • Valuation
  • Investors
  • Equity
  • Due diligence
  • Integration process
  • Synergy realization

23
What We Have Learned Operations, The
Integration Process
  • Operations, The Integration Process
  • Legal
  • Accounting
  • Human resources
  • Insurance/risk
  • Business Development
  • Marketing
  • Contract Novation
  • GSA
  • Website
  • Catalogs
  • Pricing

24
What We Have Learned Operations
  • Operations
  • Teammates new, develop a network
  • Contract vehicles
  • Opportunities aggressive pipeline development
  • Refresh/Build new qualifications
  • Diversify enter new accounts
  • Establish regular communications
  • Develop budgets Annual, Quarter Monthly
  • Get in the market conferences, visits,
    teammates, strategy sessions
  • Actually write bid
  • Drive valuation revenue, EBITDA, backlog,
    qualifications, pipeline, leadership

25
What We Have Learned Operations (Cont.)
  • Operations
  • Repair, strengthen relationships
  • Reach out to big guys
  • Pricing
  • Overhead and GA
  • Cost control
  • Accounts receivable
  • Payment terms
  • Banking relationships

26
What We Have Learned Selling the Company
  • Selling the Company
  • Goals of the sale
  • Capital raise
  • Total acquisition
  • IPO Toronto Stock Exchange
  • Maintain a share
  • Investment Banks smart money
  • Confidential Information Memorandum (CIM)
  • Presentation to the market
  • Management calls preparation, execution,
    follow-up
  • Contacting customers
  • Integration process

27
What We Have Learned Selling the Company
  • Selling the Company
  • Valuation
  • Projections
  • Revenue
  • EBITDA
  • Backlog
  • Pipeline
  • Leadership
  • Intellectual Property Patents
  • Competitors
  • Diversity of Portfolio

28
Select Members of Our Team
Bob Luby Managing Director, True North Equities Former VP of IBM Global Business Services, in charge of the Public Sector Consulting Practice (1.18B in revenue) Retired Navy Captain (20 years) Naval Academy Graduate Robert.Luby_at_tru-nor.com
Tom Glisson Managing Director, True North Logistics Retired Army Lieutenant General (35 years) Former Director of Defense Logistics Agency (17B annual budget) Former Partner and Managing Director at BearingPoint
Brian Cairns Director, True North Equities Former Deputy Chief of Staff and Founding Member of the Department of Homeland Security (DHS) Former Director of DHS Business Development at IBM and SAIC Former Deputy Secretary at the Commonwealth of PA, Department of Community and Economic Development
Helen Thompson Director of Operations, True North Equities 30 years experience in operations management for complex healthcare, public and private sector organizations Former Operations Manager for IBMs 1,000-person Global Business Services Public Sector Consulting Practice Helen.Thompson_at_tru-nor.com
29
Alternative Financing Opportunities for
Government Contractors
  • Presented by
  • Robert J. Mocerino
  • Government Contractor Finance

30
  • Big or small, every government contractor is
    faced with a scenario that looms out to them each
    time they win a new contract
  • Now that I have won the contract, can I
    financially handle the payroll expenses while I
    am waiting to get paid from the government?

31
AGENDA
  • Help you make decisions about your next steps
  • Provide overview of financing options available
    to government contractors
  • Identify the pros and cons of traditional and
    non-traditional lending paths
  • Asset Based Lending
  • Lines of Credit
  • Factoring
  • Payroll Financing

32
TRADITIONAL LENDING PATHS BANK FINANCING
  • Asset Based Lending
  • Grants access to cash more quickly than
    traditional bank loans.
  • Based on the quality of your assets
  • Based upon company accounts receivable
  • 75 - 90 advance rate
  • Provides financing option when credit worthiness
    may be weaker than the quality of assets
  • Often a less expensive path
  • Often has covenants and minimum borrowing fees
    and unused fees

33
TRADITIONAL LENDING PATHS BANK FINANCING
  • Lines of Credit
  • Based upon your companys credit worthiness
  • Approved for a specific amount
  • Provides flexibility
  • Reduces expense since you only pay interest on
    the amount advanced
  • Covenants - might limit the amount of money you
    can take of the business, might limit your growth

34
FACTORING
  • Company invoices are sold to a Factor for a set
    amount
  • Advance rates vary but usually fall in the 80-85
    range
  • You can choose which invoices you want to send to
    the factor
  • Fast turnaround
  • Tends to be more expensive than other options
  • Notice on the invoice

35
PAYROLL FINANCING
  • Allows you to use your accounts receivables to
    obtain funding to meet payroll expenses.
  • Benefits
  • Saves companies time and money and helps meet
    payroll demands
  • Flexible options grow with business demands
  • Provides financial security
  • Increases ability to bid on contracts you may not
    normally pursue
  • Provides reporting
  • Available to companies ranging from startup to
    well established businesses.
  • Available to multiple service industries
    including
  • IT Consulting companies
  • Staffing companies
  • Intelligence analysts
  • Engineering firms
  • Security companies

36
FULL SERVICE FUNDING
For Startup to Well Established Companies
  • Payroll funding with back office support
  • Advance and fund up to 100 of payroll
  • Funding of unbilled receivables
  • Payroll processing via check, direct deposit or
    "paycard
  • Tax Administration
  • W2 or 1099 processing
  • Withhold, remit and file all payroll Employee
    "self service" portal
  • Invoicing
  • Customizable Invoicing
  • Accounts Receivable Management Cash Application
  • Real time reporting
  • Advancing profits weekly
  • Benefits
  • Frees up your time to grow your business and core
    activities
  • Improves cash flow
  • Empowers you to be competitive

37
PAYROLL FUNDING ONLY MONEY ONLY
  • Payroll funding without back office support
  • For companies in business for 2 years and annual
    sales volume in excess of 3MM
  • Advance and fund up to 100 of payroll and 90
    advance on invoicing
  • Profits advanced weekly
  • Funding of unbilled receivables
  • Accounts Receivable Management Cash Application
  • Real time reporting
  • Benefits
  • Frees up your time to grow your business and core
    activities
  • Improves cash flow
  • Empowers you to be competitive

38
ABOUT STERLING
  • Sterlings comprehensive services help empower
    your business and empower your growth.
  • Publicly traded financial services firm bank
    based out of New York City with offices in
    Washington, D.C.
  • Established 1929
  • 6.7 billion in assets
  • Delivers complete line of commercial, business
    and consumer banking products and services
  • Depository and cash management services
  • Financing solutions

39
Whatever road you choose to follow, allow
yourself plenty of time for exploring your
options and determining the best path for you to
follow.
40
  • Robert J. Mocerino, First Vice President
  • Director, Government Contractor Finance
  • Sterling National Bank
  • Payroll Finance Division
  • New York
    Washington DC
  • 310 Crossways Park Drive
    Woodbury, NY 11797
  • 1000 Connecticut Ave, NW, Suite 900
  • Washington DC., 20036
  • (516) 998-6000
  • Fax (516) 762-6588
  • rmocerino_at_snb.com
  • www.snb.com/payroll
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