BUSINESS FINANCING SERVICES
Business financing services we provide
Consultdustry is a financial intermediary, and we aim to find the best matching business financing, and we deliver for this a one-stop, complementary package of business financing services, like
• analysing existing financing method
• determining future financing needs and the possibilities therein
• advising an appropriate financial structure to finance business operations
- deployment of our network of banks, financial institutions and equity investors
- the selection, approach (anonymously if preferred), attract and review financing options as a fund finder
- financing application management
- assess obtained financing offers
- discuss/negotiate business financing terms
• corporate refinancing
- to reduce need, costs and dependency (vulnerability) and improve business position
• acquiring a consistent corporate finance
• financial restructuring
- lead financial restructuring processes and provide turnaround management for a company in financial distress
• financial advice and business coaching
The objective of business financing
Within our services, corporate finance distinguishes itself according to the following spending purposes
• corporate refinancing
• growth financing
• additional loans as bridge financing (temporary distress)
• investment financing
• Innovation financing
• acquisition financing
• starter financing
• financial restructuring (debt restructuring, finance losses)
• equity financing (capital injection)
image: 10 Business financing objectives / spending purpose of funds
Refinancing is basically a continuation of existing and/or the alteration to optimise a current financing structure, intending to gain a benefit immediately. Refinancing, for example, can be interesting in the following situation;
- duration has almost expired
- too many different creditors,
- unfavourable financial consequences are attached to current obligations such as high-interest rates, or
- financial conditions make the company vulnerable, such as short durations.
With a refinancing, new financing is concluded with which the other debts are paid off in one go.
Decisive factors in refinancing are
- potentially sky-high penalty interest due on the termination of financing
- the potential risk of ending and entering into new financial/key relationships
- the striving for a better balance or flexibility in interest rates, repayment amounts (schedules), transferred securities and liabilities
- despite possible direct gain, the risks are assessed higher and financial restructuring is often not an isolated exercise but often linked to other financing objectives.
With growth capital, it is possible to take the company to the next stage of business.
Growth capital can be used for, among other things
- hiring more staff,
- additional marketing activities,
- optimising the production and supply chain process, or
- starting and expanding with foreign activities; export or a foreign establishment.
The company is actively recruiting new customers, starting new activities or working on new markets.
Decisive factors in the allocation of growth capital are;
- determined mainly by a lasting competitive advantage of the company
- a correct estimation of the growth scenario in time and size, not only as it defines the financing costs/options but also the realisation expectations of the financiers
- the available working capital may be temporarily inadequate because it will be used up to pre-finance growth.
Additional (temporary) loans as bridge financing
Every company sometimes has to deal with (temporary) liquidity shortages or needs extra financial resources. Often this has to do with customers who do not pay on time or at the expected times. If the suppliers also shorten the payment periods, there is a shortage of cash. A successful, old-established company can also find itself in situations where additional capital is needed.
The current account is increasing, and a situation arises where it is not possible to meet the financial obligations in time. Assuming that structural losses are not the cause of the scarcity, various options can give you extra cash in the short term.
Shortages in finances generally give rise to many concerns and often harm operational management. Fundamental matters are postponed, suppliers suspend deliveries. The bank will also notice the high current account position and start responding alertly. In short, it is a matter of anticipating this and an adequate cash flow planning is indispensable
Decisive factors of bridging credit
- it is crucial that it can be demonstrated that structural losses do not cause the shortage and that the company is in principle profitable (otherwise a financial restructuring is
- proper liquidity planning with receivables collection and payment budget is vital
- prevent a knock-on effect by communicating in time and taking action to obtain
- a bridging loan, despite often the small amounts, also need a financing plan with justification
- acquiring a bridging loan is hard, and moreover, it brings - nearly always - about the hectic pace of stress, the need for quick decisions and negative consequences regarding the existing financing structure
- repayments and interest obligations for bridge financing are additional costs and pressure for a company.
The company intends to invest in new business premises or business assets, such as machines and/or means of transport. Whether it is for replacement or expansion, it often concerns tangible fixed assets that will remain in the company for a more extended period.
Decisive factors or asset/investment financing
- impairment of liquidity position (is there still sufficient financial capacity available for operational business)
- long-term obligation with collateral for assets
- preferably financing with a term equal to the lifetime or depreciation of the financed assets.
Innovation, the successful renewal of business operations, is generally recognised as the driving force of the economy and social growth. It is improved products, services and processes that add value to the economy and enable us to improve the standard of living. Doing business is equal to innovative challenges! A promising idea in which people believe in its realisation, but at the same time – most likely - that idea still needs to be further elaborated and also marketed. And unfortunately, the real proof of possible future success is not yet available.
Decisive factors of innovation financing
- persuading financiers who, after all, want certainties
- exploring available, specific innovation-oriented financing structures
- in general, there is only a small amount of capital and financiers available
- has a significant risk profile and almost no intermediate exit options for financiers
- positive assessment needed of; proven entrepreneur experience, sufficient securities and development phase concept.
The process of business transfer is often a long-term process that consists of different phases.
This process runs from
- preparing the company for sale,
- establishing a realistic valuation,
- draft the memorandum,
- buyer selection,
- negotiate with potential buyers of the company,
- a due diligence
- that needs to result in the final business acquisition.
It is advisable to think about the financing at an early stage of this process. Obtaining suitable financing is, after all, crucial for the success of a takeover. If the funding of a business acquisition is not arranged or is insufficient or is not yet possible, a phased purchase or financial agreement with the selling party may be a viable alternative.
The aim here is that the buying party can finance the acquisition, partly because the ratio between the own available resources and the total acquisition sum becomes more favourable. As a result, a takeover could still be considered feasible by other financiers.
Decisive factors of acquisition financing are
- acquisitions often take place in a mix of equity and debt
- financiers expect a substantial amount of own resources from the buyer
- funding can be extremely complex due to the structure of the acquiring party with an asset holding and an operating company and a possible continued financial involvement of the seller
- usually, a considerable amount of goodwill is paid to the seller, which is difficult to finance
- the cash flow of the acquired company/activities must be sufficient to repay the acquisition financing in approximately 5 to 6 years
- as a rule, takeover financing is problematic due to a shortage of collateral, relatively short duration and a high-risk profile
- in addition to takeover financing, additional working capital financing is often required.
- suppliers, clients, credit insurers and other stakeholders will critically assess whether the company is financially solid to start or continue their relationship.
There are very few starting entrepreneurs who can finance their company on their own. Finding the right financiers is, therefore, an absolute prerequisite for starting a business in most cases. And an excellent realistic and well-considered plan is once again necessary to convince the right financiers of the business ideas. But how does a starter find these suitable and also reliable financiers and can those financiers offer forms of seed financing, tailored to the needs of starting entrepreneurs?
Decisive factors in starter financing are
- a profitable business model; customer segment, market demand/value proposition, value chain and revenue model
- business plan with financial substantiation and a multi-year forecast (coming 5 years)
- the entrepreneurial qualities; decisiveness, enthusiasm, organisational talent, commercially skilled, empathic, creativity, agility and a business attitude
- risk profile and the phase of the starter development (proven concept - successful growth)
- presence of offered (pre)-seed capital by financiers.
Financial restructuring (debt restructuring, finance losses)
New capital requirements on the loan portfolio and (imminent) losses put pressure on the availability of (bank) financing. Companies sometimes do face financial difficulties. An alert and decisive action are required (turnaround management) to retain continuity, to a certain extent, in business value and employment. Troublesome all the more, as a financial restructuring involves the cooperation of various stakeholders with often conflicting interests. The way to deal with this and to come to an agreement with all these parties determines the success. Financial restructuring is, in principle, a redesign of the balance sheet where also an equitable mix of financing sources is needed to meet the business financing needs.
Recognisable alarms from a company where a turnaround and financial restructuring are necessary are generally
- remaining cash flow and rising losses
- increasing pressure on the liquidity position
- increasing financing costs
- intensive management to keep business on-going
- under the supervision of financiers/bank administration
- high risk of insolvency
Decisive factors and possible solutions in financial restructuring could be
- adjustments and deferment of repayments, interest and interest rates
- termination of loss-making / non-performing activities.
- reorganising and (temporarily) downsizing
- (partly) divesting and selling assets or acquiring more suitable financing for assets (divest)
- (partly) divestment and sale of business activities (M&A divest) or a business merger with a financially stable partner
- Attracting equity (private equity and/or informal investors)
- finding additional/new co-owners / shareholders (MBI management buy-in, (supply-chain) business partners etc.)
- debt-for-equity swap; conversion of existing debts (creditors, financiers) for equity in the company
- debt restructuring; offering a creditors' agreement, whereby payment is suspended and/or payment is mostly written off
- insolvency, in the phase of suspension of payment or bankruptcy, although the decisions about a possible existence are not up to the company and its shareholders, although they may be the initiator of or involved in a possible re-launch.
Please note. From a legal perspective, there are various aspects of restructuring that are needed to take into account. Legal advice and/or the appointment of an expert financial restructuring consultant is inevitable.
Another remark. When making an inventory of the required consulting activities, it is advisable not only to look at possible solutions but especially at the causes of the deteriorated situation. If no structural measures are taken to generate continuity and future positive cash flow, no financing institution will make financial resources available, and the company will be hopelessly lost.
Equity financing (capital injection)
For starting and (fast) growing companies, there will come a time when they need substantial financial support for the company. This is possible through a capital injection, which is an investment in shares (or other forms of assets, possibly with additional guarantees), for cash and perhaps subordinated loans. In principle, therefore, an exchange is made for ownership/shares in the company and should not be confused with previously mentioned loans.
Equity financing is investing in the future - by increasing equity -, growing faster and making sustainable and more profit. This continuous growth is synonymous with business expansion in capacity, quality, a larger sales/market share and/or new product and market combinations.
The basis for such an expansion is that economies of scale must lead to higher efficiency. A second financing motive will be, as always; decrease or minimally unchanged risk. Thirdly must be included, the projection of the absence of investment or the consequences of firm policy.
In short, by investing capital well, the company can be prepared for the future to achieve a stable and sustainable profit margin. Growth capital helps to develop the company further to match the vision, ambition and (achievable) objectives of the company (and its existing and new shareholders).
As is well known, it is not easy to acquire equity financing. Banks and investment funds are very reluctant to invest money in growing companies. Due to the associated risks, they find relatively small investments not profitable enough. Moreover, it must adhere to ever stricter regulations, which puts pressure on investing in SMEs.
Other investors such as venture capitalists and business angels would like to receive shares or ownership of a part of the company in exchange for a capital injection. Despite all the media attention, the supply of investors, especially for ordinary non-IT technology-driven companies, is minimal. Participation should lead to a win-win situation, but the terms are often not very attractive for entrepreneurs. Our business financing services must lead to an increase in options and an equity financing agreement that has acceptable conditions for everyone.
It is also possible that equity financing is used to repay short-term loans when the cash flow is insufficient. In fact, this is a corporate refinancing solution.
Decisive factors or equity financing are
- reasons are a short-term need (repayment of loans) and/or long-term growth strategy
- involves the sale of (all type of) shares and other equity
- potential disadvantages; possible future restrictions (long-term commitment, subsequent financing rounds), long-term costs/sharing of profit, loss of control and possible potential for conflict
- needs to evaluate the possible additional benefits of equity financing (and future co-shareholders)
- guard and know the consequences of share dilution and voting rights
- growing startups have successive stock financing rounds at their various stages of existence (see also above: starter financing)
- through a stock market introduction (IPO), a private company goes public by issuing stock to the public
- national governments regulate equity financing to a very high degree.
Financing assessment by bankers
To estimate the risks of non-payment (repayment and interest), a banker makes the following assessment;
1. market profitability
- what is the perspective, the competition and the risk? - an easy to make comparison for them, since bankers have access to up-to-date data with their client base.
2. the entrepreneur
- his/her experience and success invested capital and equity of the company, the legal entity of the company, present management team and advisors.
3. required capital
- which type of credit or combination of credits and character (short or long-term) can be used to give substance to the request.
4. spending purpose
- what contribution does the financing make to the operating result, what are the consequences for solvency and is the enterprise creditworthy, as well as evaluating intended and possible unforeseeable effects (risks).
5. expected use of financing
- when are the funds needed, other potential influences (for example seasons), liquidity forecast and cash flow, future repayment and/or expansion.
6. financial contribution and securities
- already invested capital and equity of the company, historical results, and pledged business assets and/or personal guarantees (to which a certain funding percentage is allocated by the banker, based on a minimum expected return with possible capitalisation by the bank).
7. alternatives with insufficient certainty
- the banker has positively assessed the plans, but collateral has been assessed as inadequate; this could result in alternative financing with additional collateral to be provided by third parties (state, investors, funds, etc.)
8. outcome of the credit application and (legal) settlement
- an award, alternative proposal or reject entirely.
The entrepreneur will have to prepare thoroughly to receive his credit request. It used to be that way, and it still is today. But it is also clear that the sector and market are to a large extent decisive - and with the current trend of Internet of Things, ICT, new service models which are disrupting and redefining old industries, our sector of expertise: B2B engineering/manufacturing industries are less popular to financers and investors.
Funding requires an extremely professional approach building a relationship of trust. When an entrepreneur does not intend to share all information, has a bragging attitude of "I am that and want to do that and need so much" without adequate substantiation, a banker or any other financier will never ever allocate the financial resources.
The financing procedure
image: Financing procedure 10 phases
* Phase 1: determine business financing case
The objective is to obtain a first (exploratory) indication of the financing options for the relevant company and get insight into the business plan/investment plan. Indeed, there are numerous schemes, credits, guarantees and subsidies that could be fit the finance needs.
Topics that will be discussed in the non-obligatory exploratory meeting are
- what financing options are available
- determining the financing requirement
- making a business financing scan
- determining provisional feasibility of a possible financing
- formulating the quotation request of the desired financial consulting services.
* Phase 2: contract award (hire financial intermediary)
After the free consultation, we will, if desired, offer a detailed quotation, with the request to return it signed for approval.
* Phase 3: business plan
Updating or total (re)-writing a business plan, including the financial forecast for the coming 5 years. Allowing a business plan to be finalized for a financial application is a time-consuming process and can be achieved in various ways;
- the entrepreneur and staff (plus other external advisors) can do this entirely themselves
- in our cooperation to be determined, where we as Consultdustry
--- advise and approve of coming to a financing proof business plan
--- only assist and deliver some content
--- only (partially) edit the content
--- provide the overall project management with some others to be defined tasks.
Of course, it remains an absolute condition that we can fully agree with the content of the business plan that will be submitted at a financing application. If this is not the case, we will terminate the assignment.
The goal for drawing up a suitable business plan for a financial application is to increase the chances of granting the financing. It has been proven that entrepreneurs with a good business plan;
- more likely are capable of setting up and maintain a successful business
- be able to present the financing application with more conviction.
For smaller financing matters, it may not always be necessary to draw up a complete business plan, and a summary with an extensive financial section will suffice. Nevertheless, a business plan will still be required immediately when submitting a financing application.
* Phase 4: feasibility and position improvement plan
In the first place, this is an interim assessment focusing particularly on possible weaknesses and bottlenecks that could lead to a rejection of financing. Subsequently, the following items must also be identified;
- planning, the timeline with critical moments
- the desired and optimal financing structure
- alternative financing options
In fact, it is a no-brainer, but in this phase one will also have to consider, certainly if it is necessary and especially if sufficient time is available, to draw up a position improvement plan and implement it immediately. Adding an ongoing improvement plan, with the status and expected and achieved results, will avoid disapproving discomfort and will have a positive effect on the follow-up process.
* Phase 5: financing plan
Parallel to the implementation of the position improvement plan, we take the initiative to prepare the financial plan. A financing plan is actually an extension of the financial and numerical substantiation of the business plan.
This includes, among other things;
- the desired financial structure
- purpose of the financing
- the business financial forecasts and
- estimates of the repayments of the funding obtained.
In addition to drawing up the financing plan for the desired and optimal financing structure, one can opt to also prepare a financing plan for the other alternative financing options. It goes without saying that although we as a business advisor take care of most of the financing plan and numerical substantiation, the management/entrepreneur should be thoroughly familiar with all the details as he/she must present and defend it to the financiers.
* Phase 6: financing proposition
After the financing plan has been drawn up, contacts can be made with various financiers. In this phase, we, as the business adviser, will actively investigate the possibilities of obtaining suitable financing. In the case of a debt financing (loans), that can be easily realized by contacted reputable banks, and will only be an announcement. However, complex financing structures such as equity financing (co-shareholders), are generally long-term and intensive processes in which many new and existing contacts must be approached confidentially.
Our job as a business advisor is to come up with concrete and realistic options, interested financiers and our consulting activities in this phase are
- select and approach potential financiers (long list)
- discuss with them - initially anonymous - the business financing case
- assess the success rate
- to eventually come up with a short list of prospective financiers
We usually report at least once a week - if desired in writing - on the progress and (adjusted) strategy; carried out and planned activities and the results and new developments concerning the financing proposition.
* Phase 7: financing application submission
Assuming that all administrative and legal matters regarding the company and its entity are settled and that there is a short list with prospective financiers, the financing application can be started. If there is a tangible chance of success under acceptable conditions, the financing request can now be formally submitted with all further documents required. If there are different layers or financing sources, the financing components must be treated and submitted in a specific order.
As a business advisor, we take care, regarding the financing application, care of the following tasks;
- ensure proper preparation
- a correct and timely submission
- the follow-up through direct consultation with the financiers
- feedback to client/entrepreneur of the status of the financing application.
* Phase 8: financing application evaluation & management
The application has been sent to the bank (s) and/or other debt and equity provider(s). Interested potential financiers will want to have further contact, visit the relevant company and ask a large number of critical questions. It is very important to ensure a good welcome, presentation and substantive discussion. We will, of course, be present and, where possible, provide some guidance, but the entrepreneur is in charge and will have to convince the financiers. In addition to a suitable coherence and a good pitch, the provision of money often remains a personal award. Ultimately it will determine whether the entrepreneur or managing director can convince the financiers of firmness and faith in the success of his/her company.
If the contacts are a precursor to a possible allocation of the requested capital, the conditions will of course also be addressed first and foremost in a sensible way. Our advisory role in this phase must be explicitly, in advance coordinated with the entrepreneur, practised if possible, to steer the conversation in the right direction. Consider, for example, pre-discussed strategies on 'what if', distribution of possible topics/questions and know the bandwidth of conditions and the no-goes.
In the financing application evaluation and management, our consulting includes;
- (co) preparing the presentation and interview
- training the entrepreneur and his team for the pitch and meeting
- passively participate in the discussions and only act as a guide in the event of (upcoming) disruptions
- maintain contact with the financiers in order to know their assessment and further developments and to be able to steer where possible
- advising on negotiation processes and conditions
- if desired, participation OR management of the financing acquisition and the associated negotiation of the conditions (option!)
* Phase 9: business financing provision
Successful, the financing will be provided. Depending on the form of the funding, several formalities will now have to take place. In this, it could also be possible that the financiers have certain specific requirements that must be met. The most common formalities include guarantees, notarial deeds, subsidy statements, tax matters, arranging for periodic transfer of financial data, etc. As a general rule, the company can settle this independently without our assistance.
* Phase 10: business coaching (optional)
Appropriate financing is crucial for business success. If the cooperation has proved successful, it would be useful for all parties (including the financers) to continue the relationship and, if desired, formalize it. Consultdustry can support the company and its management regularly or on demand as an independent adviser, business coach and/or non-executive director (board advisor). We are practical experts; we supervise, we are a valuable sounding board for management, we are the troubleshooter when solutions are needed and/or company’s ambassador when it comes to contacts and stakes. Strategy and decisions, we make our experience and expertise available to a company's management to ensure business continuity through development and returns.
Besides, specifically for financing follow-up, we regularly offer financing management services consisting of
- company scan/review of company status (based on made business plan and financing plan)
- reporting significant deviations and outcomes (brief description)
- updating the financing plan with an up-to-date forecast
- possibly supplemented with a refinancing advice
- recommendations of to be taken business actions to improve
- discuss findings with and counseling the management of the company
- a status consultation with financiers
Fees & Contracts
The rates of our business advisers are accessible to all entrepreneurs and businesses; we always try to find a suitable solution. We can make an offering with a combination of
- an hourly rate
- a project rate
- closing rate (success fee on financing)
- equity swap (participation)
This partly depends on the business situation, customer requirements, the type of financing application and the complexity of the business financing. We, for sure stand for clarity and always indicate in written quotations for what, how and when a payment is due.
A first meeting is a free without obligation consultation in which we also can explain our business financing services, working method and rates. In this meeting, we are hoping to receive sufficient information, about the business financing case, to be able to make a suitable offer. No payment is due until an officially signed order confirmation is given.
Our focus in business financing
With our business financing services, we focus on an explicit market
- old-established companies with a minimum annual turnover of $ 2,000,000 and a maximum of $ 100,000,000 (US dollar)
- recently started companies (startup), which have or can achieve within 1 year a turnover of $ 2,000,000 (US dollar)
- the sector of service: B2B engineering/industrial sector; construction, energy, food (processing), logistics, manufacturing, oil & gas, telecom, trade
- area of service: ASEAN
NOTE we do NOT OFFER business financing services to the following sectors
- internet of things, IT - information technology, blockchain, cryptocurrency, entertainment, tourism, hospitality and real estate.