The XBanker
Business Financing eXpert
Archive for July, 2008
Credit Investors: Partnering For Personal Credit
July 18th, 2008
Like it or not, your personal credit will open or shut doors for financing your business. If you have terrible personal credit, we can help you obtain trade credit, credit cards, equipment leasing and potentially some bank financing. However, we can obtain much more financing, if a business owner has great credit (preferably 700+ FICO). This has important consequences for you, if you are trying to finance a business and have poor personal credit. You need to consider bringing on a credit investor or partner that can help you obtain bank financing for your business.
Last week, I asked an entrepreneur about his loan readiness and he told me his credit was in the toilet. So I turned to his partner, “My credit is even worse,” was his reply. I guess when it came to selecting partners, this criteria slipped their minds - don’t make the same mistake. Unless a partner brings irreplaceable technical expertise, they can always be replaced with someone that brings skills and credit to the table.
If you’re an entrepreneur with poor personal credit, you should consider bringing on a credit investor or partner. Ideally, you’ll need someone with 700+ FICO scores and good ratios (feel free to ask one of our consultants to do an analysis of a potential partner before you tie the knot). You may have better luck finding an investor or partner with good credit, than finding one with cash.
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Two More X-Men Join The Team
July 16th, 2008
From the day we started the XBanker we set out to do two things: bring together world class expertise and best in breed solutions for helping entrepreneurs access capital for their business. We’ve been busy making key deals to enhance our offering and to attract great talent. That being said, it is my pleasure to announce that Trent & Chad Lee are joining the XBanker initiative - a critical portfolio asset for Shared Success.
This dynamic duo built Corporate Credit Concepts from the ground up, establishing themselves as the premier provider of cash credit solutions for entrepreneurs. We have formed a strategic alliance to integrate our consulting solutions into a combined offering: Business Credit Success. Through this partnership, we will be able to help our clients obtain thousands of dollars in cash credit without personal guarantees - regardless of the business owner’s personal credit.
Stay tuned as this relationship develops and other key acquisitions are made. In the meantime, enjoy the great content these two experts will contribute to the blog and to the business.
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Preventing Unnecessary Dilution
July 15th, 2008
One of the biggest mistakes entrepreneurs make is that they give away too much of their business too soon. I’ve spoken with entrepreneurs that own less than 2% of their brainchild after diluting for “friends, family & fools” and for venture capital. You need to properly stage the financing of your business and to do so under the best circumstances possible to prevent unnecessary dilution.
Let’s say you are raising $250k from investors to start your business, if the business is only worth $500k, the investors will own 50% of it; if the business is worth $1m, they’ll only get 25%. The higher the valuation, the greater the percentage of your business that you’ll retain. It can be challenging to justify your valuation without revenue - which is where promising entrepreneurs routinely get taken to the cleaners. This is why I typically recommend convertible debt to raising hard equity, and why I recommend obtaining debt financing in the early stages of your business.
First of all, most business won’t raise a dime in outside capital. Investment networks are flooded with hopefuls that burn time and money trying to raise money - not recognizing the complete tooling they will receive in the event that someone actually believes their concept has merit and wants to invest. It is a lot easier to attract capital, and to do so on your terms, if you have successfully proven the concept and have some traction.
Unless you’re building airplanes, you can probably get things moving with less than $100k. This is why the XBanker is an important asset in the Shared Success family - we are here to help entrepreneurs establish a strong foundation, nailing the fundamentals and obtaining “seed credit” so they can get things moving. So if you are still slumming on the investment networks and forking over gobs of money for a business plan that no one will read (and if they read it - they sure won’t believe it!) - stop. Let us help you get your first $200k, so you can bring on investors under the right conditions.
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You Know You’ve “Arrived” When…
July 10th, 2008
…you make a cameo appearance in an Angelina Jolie movie.
Garrett Sutton’s book, The ABC’s of Getting Out of Debt, makes a cameo during a scene of the movie: Wanted.
The word on the street is that the movie is pretty lame - I guess the trailer is better than the flick (so you can see it here and save yourself some money). I imagine there will be some fatalities from kids trying to “bend” bullets (watch the trailer to see). On the other hand, Garrett’s book has received very positive reviews and no one has been fatally injured practicing anything in the book!
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What’s Your Hurdle Rate?
July 9th, 2008
My mother always taught me that “beggars can’t be choosers” and my father preferred the “don’t be penny-wise, but pound foolish” - either expression is fitting for this topic. In the last week, I’ve had three experiences that made me think about being wise when you need money for your business and understanding the concept of a hurdle rate.
My first experience was a discussion with a consultant to a portfolio of companies in various stages of their business - all with immediate capital needs. We were exploring potential solutions for these people. Most simply needed $50-100k to purchase inventory or to invest in new opportunities - getting the money is critical to their success. Yet, as I started asking questions, I was being shot down with every possible financing option. It was apparent that these business owners were looking for $100k for 2-3 years at less than 5% interest with no colateral and no personal guarantee and they wanted it now, despite their less than stellar credit.
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