1.
Financing Your Business:
When and How to Use Debt and Equity
Presented by: Frank Coker, CMC, MBA
CompTIA Faculty
CEO, CoreConnex, Inc.

2.
Why does it matter?
• Debt and equity management are essential to
growing a business
• It is too late to get cash when you’re desperate
• It’s far less expensive to do it right (plan ahead)

3.
Why does it matter?
Your money + their money = lift-off
(Then you can play with the big boys)

4.
Agenda: Financing your Business
• Why does it matter?
• Flavors of debt and equity
• Ratios that matter
• Relationships that matter
• Strategy / timing
• Best practices
• Dashboarding
• CompTIA resources

5.
How Does it Work?

6.
How Does it Work?
• Credit cards
• LOC (line of
credit)
• Vendor credit
• Short term loans
• Credit cards
• LOC (line of
credit)
• Vendor credit
• Short term loans
• Mortgage
• Leases
• Long term loans
• Convertible debt
• Mortgage
• Leases
• Long term loans
• Convertible debt
• Founders stock
• Common stock
• Preferred stock
• ESOP / SOP
• Warrants
• Founders stock
• Common stock
• Preferred stock
• ESOP / SOP
• Warrants

7.
How Does it Work?
• Credit cards
• LOC (line of
credit)
• Vendor credit
• Short term loans
• Credit cards
• LOC (line of
credit)
• Vendor credit
• Short term loans
• Mortgage
• Leases
• Long term loans
• Convertible debt
• Mortgage
• Leases
• Long term loans
• Convertible debt
• Founders stock
• Common stock
• Preferred stock
• ESOP / SOP
• Warrants
• Founders stock
• Common stock
• Preferred stock
• ESOP / SOP
• Warrants
• Paid off in one year
• Cover fluctuations
• Align cost/ revenue
• Paid off in one year
• Cover fluctuations
• Align cost/ revenue
• Paid over years
• Investment in
future revenues
• Align cost/ revenue
• Paid over years
• Investment in
future revenues
• Align cost/ revenue
• Paid at exit (or drain
early)
• Accum earnings
• Invest in future
value
• Paid at exit (or drain
early)
• Accum earnings
• Invest in future
value

8.
The Cost of Money
Source Interest Principle Cost
Credit Cards Highest Flexible Highest
Line of Credit Moderate
Flexible
(should pay down
often)
Moderate
Short Term
Loan
Low-
Moderate
High Moderate
Long Term
Loan
Low Low Moderate
(low annual)
Stock n/a n/a
Dilution -
winner takes
all!

9.
What Does the Banker Want?
• Profitable and thriving customers
• Long-term relationship
• Minimum risk – high certainty
• Mutual trust – up-front honesty
• Visibility
• Opportunity to help solve problems early
• Current (not dated) information
• Success stories; referrals

10.
The Biggest Problems
• Surprises – with no opportunity for a fix
• Shut down on communications
• Personal banker looses borrower to the “troubled
assets” department when surprises occur
(no fun for anyone)
• Customer borrows money for the wrong purpose
(e.g. LOC increase for a capital investment)

11.
Special Cases
Solutions:
•Personal guarantee from
owner
•Personal assets as collateral
•Higher cost loans
•“Alternative Lending” sources
•Third party investor (provides
investment and guarantee on
loans)
High-risk Situations
•Service Company – no long-
term assets
•Extreme peaks and valleys
•Revenues on down trend
•Industry that is struggling
•Company with history of
losses
•Company that is highly reliant
on a single expert

12.
Key Concepts
• A company with no debt has no leverage
• A company with no debt works harder to keep up
with competitors that have appropriate debt levels
• A company with excessive debt often cannot grow
fast enough to solve the problem; austerity is often
the only way out
• Too much debt will crush a company
OPM - Other People’s Money
(pronounced “opium”)
can be addictive

13.
Ratios that Matter
•

14.
Financial Strength Metrics
Working Capital = Current Assets – Current Liabilities
Target Rate = 1.5 [average across industries, some industries different]
Target Minimum = (1.5 x Current Liabilities) – Current Liabilities
Example:
Current Assets = 100
Current Liabilities = 60
Working Capital = 40
Target Minimum = 30

15.
Healthy Scenarios
• Goal is to get above Target Minimum
• Understanding “health” means tracking trends

16.
Unhealthy Scenarios
• Falling below or being below Target Minimum
is fundamentally unhealthy
• Understanding “health” requires trend lines

17.
Relationships that Matter
•

18.
Strategies and Timing
When should you
repair your roof?
When is the repair
most urgent?

19.
Thinking Ahead
Planned
•Normal fluctuations
•Expansion
•Investment
•Acquisition
•Merger
Unplanned
•Economic downturn
•Competition
•Technology shift
•Opportunity
•Disaster
•Health surprise
It takes time to get ready;
All scenarios benefit from a strong financial position

20.
What are Your Trends
• Growth
• Margins
• Working Capital
• LOB Performance
• ROI
• Asset Performance
• Staff Contribution

21.
Get an Advisor (Coach)
Recommended role:
•Facilitate monthly review process
•Build structure and process
•Keep focus on priority issues and opportunities
•Help solve specific problems
•Support accountability

22.
Corelytics Dashboard
•Trends
•Goals
•Comparison
•Forecasts
•Metrics
•Contribution

23.
Dive Deep – Dive Quickly

24.
Monthly Process
1. Set Goals
Establish Plan vs. Actual
2. Track Trends
Adjust to hit goals
3. Align Team
Share to build understanding
and commitment

25.
Tips
• Your accounting or goals don’t have to be
perfect, start and adjust
• Get help (advisory board, experts)
• Force accountability (peers, associations)
• Manage/borrow cash as one of your top goals
• Get your team involved! (screen shots of
dashboard)
• Dashboarding makes it easier

26.
CompTIA Benefit:
Free Financial Report
See your trends, financial strength and working capital
Free Financial Consultation
CompTIA members get consultation
with Financial Expert
(each with IT expertise).
How?
•Email: support@corelytics.com
•Subject: Financial Strength
•Text: Your contact information & your
current accounting system type

27.
For More Information
https://CompTIA.corelytics.com

28.
Questions?
Thanks!

29.
Thank You!
https://comptia.corelytics.com
Contact Frank at –
frank@corelytics.com