\n\t\t\tEverything I\u2019ve outlined should take an estimated 4-5 weeks from our first phone call. That puts it at Week 6 for a signed term sheet.\t\t\t\t\t<\/p><\/blockquote><\/div>\n
Often we\u2019re lending to companies that sell to big enterprises, so instead of having a million customers they\u2019ve got a hundred, and we\u2019ll want to understand how they sell, how predictable their sales forecasts are, and how comfortable they are with the coming years. All of that helps us judge how much we believe in their financial projections.<\/p>\n
A list of the largest customers, present and past<\/h3>\n
Detailed customer information allows us to identify customer concentration or churn. Those can be quick disqualifiers, and we don\u2019t want to waste a lot of anyone\u2019s time if that\u2019s the case.<\/p>\n
If a potential borrower\u2019s customer base is too concentrated (fewer than 15 total customers or more than 50% of revenues from just a few customers), that\u2019s too risky for us. Or if the startup has a lot of churn \u2013 meaning that their existing customers decided they\u2019re not going to renew or stay with them \u2013 that\u2019s another red flag\/likely disqualifier. There is nuance around this, too. If your product has evolved significantly and in what we would consider a positive, logical direction, then churn could make sense.<\/p>\n
With all this information, we can do a desktop analysis that typically takes two weeks. We could do it more quickly if absolutely necessary, but we like to give ourselves two weeks. If the desktop analysis is positive, we would issue a term sheet.<\/p>\n
Doing it our way allows us to customize a thoughtful structure and set of terms that are fair for us and appropriate for the borrower. For example, tailoring the loan for the borrower could be around when you actually need the money. Maybe you need it right away, or perhaps it\u2019s a little further down the road.<\/p>\n
Other variations could mean structuring the deal so the interest rate declines as the company gets stronger, or having a longer interest- only period, where the debt isn\u2019t amortizing, because you wouldn\u2019t be in a position to start to amortize until a certain event occurs.<\/p>\n
I would estimate that everything I\u2019ve outlined above should take about four to five weeks from our first phone call. That means you\u2019d probably have a term sheet by Week 5.<\/p>\n
Going to the board<\/h2>\n
Up until now you\u2019d probably only have the CEO and CFO involved. Once you get a term sheet, you\u2019d want to present the deal to the board.<\/p>\n
Some companies will have their board involved from the beginning of the process. I\u2019ve known of deals that got derailed because a board member didn\u2019t want to do a deal with a specific lender. It could be a personal (and one-sided) beef; it could be that a board member knows something specific about the lender. This has never happened to us, which is why I suggest at least letting your board know what lenders you\u2019re talking to early in the process.<\/p>\n
How quickly things move from the board presentation step depends on the borrower. They\u2019ll likely be looking over term sheets from different lenders. I would guess 10% of the time we\u2019re the only lender involved. The other 90% of the time there are multiple lenders pitching to provide growth capital. The company may also be considering using some or all equity to meet their needs.<\/p>\n
If there are three or four term sheets to work through and compare, you will probably take about a week to get through those. While a deal itself may be relatively straightforward, that doesn\u2019t mean that every deal will be the same. Not only do lenders differ regarding the stage at which they will lend money, but some will also specialize by industry. Terms will, of course, vary from lender to lender.<\/p>\n<\/p><\/div>\n
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Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"David Spreng is a seasoned venture and growth debt lender with 30 years of experience, the founder and CEO of Runway Growth Capital, and the author of All Money Is Not Created Equal. The first step in the process of raising venture debt is a quick, introductory filtering phone call between you and the potential […]<\/p>\n","protected":false},"author":1,"featured_media":26383,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"class_list":{"0":"post-26382","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-tech"},"_links":{"self":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts\/26382","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/comments?post=26382"}],"version-history":[{"count":0,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/posts\/26382\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/media\/26383"}],"wp:attachment":[{"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/media?parent=26382"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/categories?post=26382"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/entertainment.runfyers.com\/index.php\/wp-json\/wp\/v2\/tags?post=26382"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}