Learn the various funding sources available, review pros and cons of each, determine which fits the client best, and learn to negotiate a good deal.

1. Tips for Successful
Loan Negotiation
hennesseycap.com

2. Toby Dahm
Senior Vice President
Hennessey Capital
Over 25 years of experience in commercial lending
Traditional, workout, factoring and asset-based lending experience
Expertise in underwriting, portfolio management, marketing and
product development
Former entrepreneur
Recognized and trusted expert – Automation Alley, Tech Town, etc.

3. Goals of this session
Understand the various funding sources available
Review pros and cons of each
Determine which fits the client best
Learn to negotiate a good deal

4. Seed Capital
Angel Investment
early stage equity
investment
Financing Spectrum

5. Poll Question #1
For a company in the rapid growth stage of its
business life cycle, which of the following sources
of financing is the most appropriate?
a. Seed capital
b. Asset based financing
c. Conventional bank loan
d. Equipment lease

6. The First Step
Business Plan
What value does your business provide?
How does that translate into profits?
Where are you in the business life cycle?
What are your financing needs?
What finance structure should you request?

7. Business Plan Assistance
Michigan Small Business Technology Development
Centers (MI-SBTDC)
Mission is to support business growth
42 office throughout the state
http://misbtdc.org

8. Poll Question #2
Preparing a business plan is a cost-prohibitive
endeavor for a small business.
a. True
b. False

9. Seed Capital
Used for New Businesses to fund initial idea or prototype
Sources Include:
• Friends and family
• High net worth individuals
• Company or organization
• More patient investor, provides mentorship, co-investment
opportunities, industry expertise, smaller investment.

10. Seed Capital Assistance
Tech Town First Step Fund
A partnership of the Invest Detroit Foundation, Tech
Town, Ann Arbor Spark and Automation Alley
It is a revolving loan pool that provides funding up to
$50,000 to support the development and growth of
businesses in Southeast Michigan
http://www.investdetroit.com/managed-funds/first-step-fund

11. Seed Capital Assistance
Automation Alley
Has a pre-seed fund which offers qualified companies
in competitive edge technologies funding of up to
$250,000 as well as consulting services
The Alley also provides connection to other funding
sources
www.automationalley.com

12. Seed Capital Assistance
Ann Arbor Spark
Provides consulting services & connections with seed
capital funding sources for Ann Arbor-based firms.
www.annarborusa.org

13. Poll Question #3
Which of the following is NOT a source of seed capital
to support the launch of a new business?
a. Tech Town First Step Fund
b. Main Street Bank
c. Automation Alley
d. Ann Arbor Spark

14. Angel Investment
Investor(s) provide capital for a new business, usually
in exchange for convertible debt or ownership equity
Funds used primarily for moving from concept to
production
Entrepreneurs need a business plan, compelling story
and a convincing exit strategy

15. Angel Investment Assistance
Great Lakes Angels
Expressed resurgence under the leadership of David
Weaver
www.glangels.weebly.com

16. Angel Investment Assistance
New Enterprise Forum
Provides consulting, including connection to funding
sources. Not limited to Ann Arbor – they assist
company throughout the Midwest.
www.newenterpriseforum.org

17. Angel Investment Assistance
Grand Angels
Provides consulting and investment in businesses in
Michigan with a preference for those located in Kent,
Ottawa and Muskegon counties.
www.grandangels.org

18. Poll Question #4
Angel investors prefer to maintain a low profile and
invest alongside other angel investors.
a. True
b. False

19. Factoring
Used by business to business sales companies
Used by companies with limited track record or rapid growth
Advance 75% to 90% of invoice for immediate cash
Bridge A/R collection and A/P payment gap
Can be used in conjunction with current bank facility
This form of financing has been used since the 15th
century to help
businesses grow

20. Asset-Based Finance
Asset-Based Line of Credit
Used by established B2B sales companies
Used to restructure current bank debt or as succession financing to
factoring
Leverage asset classes to maximize cash-accounts receivable,
inventory, machinery and equipment or real estate
Stepping stone to traditional bank relationship
Learn more at www.cfa.com

21. Equipment Finance
How It Works
Asset-specific finance vehicle
True lease and capital leases
Leverages 100% of asset value
Ability to ‘bundle’ and finance the cost of related software and services
Flexible terms (step payments, end-of-lease options, etc.)

22. Equipment Finance
Best suited for companies with:
• Multi-year track record
• Demonstrable ability to pay out of cash flow (or
guaranty)
• Strong collateral value
Equipment finance has a low barrier to entry.

23. SBA Lending
Available to all business stages
• Start-up
• Limited Track Record
• Existing (2+ years)
Two typically used loan programs: 7a and 504
• 7a can be used for commercial real estate purchase/expansion/ground-
up, equipment purchase, business acquisitions, debt refinance,
working capital (no lines of credits)
• 504 can be used only for commercial real estate
purchase/expansion/ground-up and equipment
SBA loan sizes can start at $10,000

24. Conventional Bank Lending
Companies with established track record of sales and
performance (at least 2 years)
Full relationship with multiple bank products in
addition to loans
Lower rates and looser terms than earlier term
financing
Long-term relationship

25. Poll Question #5
Which form of financing has the earliest origin?
a. Conventional bank loans
b. Equipment leasing
c. Venture capital
d. Factoring

26. Poll Question #6
Due to the focus on the assets that provide the
collateral to secure the loan, which of the business
segments below would qualify for an asset based
loan?
a. Service
b. Distribution
c. Manufacturing
d. All of the above

27. Poll Question #7
If an entrepreneur has a bank loan, it will prohibit
him/her from obtaining an asset based line of
credit to fund growth financing needs.
a. True
b. False
c. Maybe

28. Preparation
Financial Documentation
• Historic balance sheet and income statement (3 yrs).
• Current period balance sheet and income statement.
• Projections including cash flow and income statements.
• Proforma balance sheet, if applicable.
• Accounts receivable and accounts payable agings.
• Contracts or purchase orders.
• Customer list.
• Personal financial statements and resume (s).
• Inventory reports, building or equipment appraisals.
• 2 years personal and business tax returns.

29. Communication
Treat as personal and business interview.
Confident but not combative.
Describe opportunities and recognize challenges.
What else should the lender / investor know now that they
will probably find out on their own?
If no, ask for advice and use as opportunity for next
presentation.

30. Tips for Finding Funding
#1 Understand the financing landscape and where your
“ask” fits in the spectrum of players.
#2 Leverage professional advisors for mentoring and
coaching.
#3 Be prepared and explain your needs and business in a
concise but complete manner.
#4 If turned away, ask for direction and steps required for
a “yes.” Don’t be defensive.
#5 Network, network and network.

31. Poll Question #8
In order to obtain the best possible financing, it is
important to conceal business’s weaknesses to
showcase the company in the most favorable light.
a. True
b. False

32. Due Diligence
Due diligence is the verification of data submitted, for
whatever source you are submitting it to.

33. Due Diligence
Due diligence consists of:
• Business in good standing
• Personal credit
• Business and personal litigation
• Criminal background check
• A review of any business liens
• Personal and business references
• Vetting of customer relationships and forecasts
• Field examination
• Appraisals
• Review of important contracts
• Discrete inquiries (non-supplied references)

34. Negotiating with Lenders/Investors
What is most important to you?
Availability of funds?
Cost?
Freedom from restrictions?
A trusting relationship?
Maintain Options
Negotiate with multiple parties
Keep “Plan B” alive

35. Negotiating with Lenders/Investors
Choose your battles wisely
Fight for what is most important
Don’t’ create hypothetical “horribles”
Empathize with the other party
Make a business case to support your stance
Settle when possible
Recognize the value of a bird in hand
Can you adjust to make the agreement work?
Will your partner re-visit the issue and what will change their position?

36. Thank You
Toby Dahm
Senior Vice President
Hennessey Capital
248.658.3208
tdahm@hennesseycap.com