Raising bank finance for Service and IT companies

1. DIC Excellence Series
Presented by Salvus
Advisors JLT
Raising bank finance for Service and IT
companies
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2. How banks perceive ALL SMEs…..
SMEs are perceived as high risk…
High concentration risks
Key man risk
Limited fall-back options
Poor financial management & transparency
Unable to articulate financing needs
Skip risk
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3. How are IT and service companies
different?
Hardware (IT) and service companies slightly different…
Both sectors perceived as higher risk.
Low entry barriers
No exclusivity, low USP levels?
High stock obsolescence risk
Service companies : Dealing in intangibles
Higher risk of commercial disputes
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4. The Preparation: If you are a Start up
By start up, any firm that is less than 2 years old…
Begin by maintaining clean accounts
Use an outsourced accounting service provider
Ensure you have good (cheap) software
Get your accounts audited by a bank empanelled auditor
Ensure your payment record is good
Open operating accounts with 2 “right” banks
Build good reputations with buyers/suppliers
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5. Start-ups, continued…..
Balance sheet lending to start-ups, almost impossible now.
So what are your options?
Expensive parameterized loans
Some structured trade financing MAY be possible
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6. Mature, 1st time borrowers
Hard work, even for mature companies, especially service
providers…
Clearly identify financing needs as a bank would
Prepare a brief but comprehensive business plan
Put together a comprehensive information pack
Identify the appropriate bank
Get introduced, if possible
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7. Showcase your strengths
Identify your strengths. Consider whether you have:
High quality suppliers / buyers
Some identifiable USP
Established track record with suppliers & clients
Good history of managing stocks & receivables
Number of repeat clients
Testimonials from suppliers/clients
Process qualifications from international, reputed bodies
Financials audited by reputed auditors
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8. Case study..1st time borrower
The client…
Logistics, freight forwarder, supply chain service provider
Pros: Good client base
Reasonable financials
Fast growing
Cons: Chunky exposures to few clients
Slightly erratic track record
No borrowing track record
© Copyright SALVUS. 2011

9. The SALVUS Solution….
 Chose bank that understood service industries
 Structured financing based on company strengths
 Focus: performance track record and quality of clients
 Short duration of debt
Solution: to set up a factoring line for discounting receivables.
Next step: to finance network expansion vide loans, once track
record established.
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10. THANK YOU
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