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
1Small 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
2AGENDA
- 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
3Understanding Non-TraditionalFunding Sources and
Alternative Forms of Working Capital
ACCESS TO CAPITAL is the KEY to Your Companys
SUCCESS!
4WHAT 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?
5Sources 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
6Comparison 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
7Businesses 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
8Industries 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
9Who 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.
10What 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
11Lets 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
12TNE 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.
14Member Companies
15Our Services
16Business 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
17Capture 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
18Proposal 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
19Shared 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
20Finance 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
21What 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
22What We Have Learned Acquisition (Cont.)
- Acquisition
- Previous teammates
- Valuation
- Investors
- Equity
- Due diligence
- Integration process
- Synergy realization
23What 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
24What 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
25What 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
26What 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
27What We Have Learned Selling the Company
- Selling the Company
- Valuation
- Projections
- Revenue
- EBITDA
- Backlog
- Pipeline
- Leadership
- Intellectual Property Patents
- Competitors
- Diversity of Portfolio
28Select 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
29Alternative 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?
31AGENDA
- 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
32TRADITIONAL 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
33TRADITIONAL 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
34FACTORING
- 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
35PAYROLL 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
36FULL 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
37PAYROLL 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
38ABOUT 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
39Whatever 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