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Here’s what you can do now to improve cash flow and liquidity

What should I do now?

You’re not alone.

CEOs and CFOs are all asking the same question.

Covid-19 is challenging every business to operate in a tremendous time of uncertainty.

  • How long will it last? 
  • What will it mean for our working capital and liquidity?
  • Will credit markets seize up?

These are questions no one can answer.

But having said that, there are things you can do to prepare. 

Here are some questions we can answer. Also, here’s how we can help support you with getting funding options on the table during the Covid-19 outbreak.

Rest assured, we will update you as and when we get more information.

 

1. Can I still access funding? Are private debt funds even lending?

 

The good news is the answer is yes. But obviously, it might take a little more time than usual to get answers and secure funding. 

 

2. Should I wait to borrow, or take action now?

 

Given the extra time it will take to secure funding, now more than ever before, we recommend planning ahead and to not leave it to the last minute to seek funding.

 

3. What options do I have available?

 

Private debt funds and in particular venture debt specifically caters to the needs and perceived risks associated with tech companies.

You can use private debt facilities to top-up replace and complement existing finance facilities.

In times of uncertainty, you can use private debt to:

  • Extend your cash runway
  • Enhance liquidity and improve working capital
  • As a cushion to protect your company against potential delays, a strategic pivot, or if you need more cash than initially planned.

 

Elsewhere you can strengthen your business financially by refinancing your existing debt. Because when you refinance your debt you can:

  • Secure more favourable terms
  • Free up cash flow to generate more working capital
  • Free up capital to reinvest into your business
  • Have greater operating flexibility
  • Reduce your cost of capital
  • Get fast access to cash

 

4. What about the cost of capital?

 

The paramount concern of any lender is risk. 

So if you have a solid business plan, and up and until now operate in a market with plenty of room to grow, then you have a good chance of raising the funds you need at a reasonable price.

 

6. Should I even be considering taking on debt during a crisis?

 

The answer to this question depends on an individual business.

If your business model is robust and you operate in a market with plenty of room to grow, then it’s worth getting options on the table.

You could consider taking advantage of low-interest rates and getting capital in place for when the economy and the market recovers.

During this crisis, banks may lose their appetite for risk. Therefore it may take months to secure the money you need.

However, as I’ve mentioned before, many private debt funds take a specific interest in the tech sector and structure loans accordingly.

To get their attention, talk to a specialist private debt fund broker. Due to the amount of transactions sourced, structured and closed, a broker will have good relationships with funds with capital to deploy. 

 

How is Fuse Three operating during the lockdown?

 

Thanks to the tech sector, in particular, SaaS businesses, it’s business as usual for Fuse Three, albeit from a different location.

Of course, we’ve asked all our staff to work from home. Fortunately, we already employ remote workers, so they’re used to it.

Finally, we expect more change over the coming days and months. But like you, we’re an agile company and as such, we’re equipped to carry on supporting you.

We’re in this together.

Private debt versus bank lending for technology businesses

Finding the right debt finance instrument to fuel the growth of your tech company can be stressful. You know there has been an explosion in private debt lending, but how do you navigate your way through the many funds in this complex new market?

Moreover, how can you tell the differences between bank and private debt lending facilities?

In particular, how do you fathom out the differences between debt fund loan structures and reporting requirements?  And the cost of capital?

Then, of course, how can you be sure your chosen private debt fund can deliver on its promises?

If you’re considering raising private debt for your mid-market tech business, in addition to or as an alternative to bank lending, here’s what you need to know.

 

What is private debt?

Private debt is a term given to debt investments not financed by banks or traded in an open market.

You may also hear private debt described as alternative debt, direct lending or private credit.

Typically, the people who run private debt funds have strong backgrounds in commercial banking.

Better still, many focus on niches and have expert knowledge of the markets in which they work.

 

How did private debt come about?

After the 2008 global financial crisis, bank lending to companies shrank because bankers had to repair their battered balance sheets and contend with stringent new regulations.

So alternative financiers, including private debt funds, stepped in to fill the gap.

And fill the gap they did. In a report titled: ‘The Rise of Private Debt as an Institutional Asset Class’ ICG tells us: “In the US, “non-bank debt accounts for 75% of total corporate lending, compared to 10% in the Eurozone and 28% in the UK.”

It added: “Private debt is growing in the UK and Europe as investors realise its strong returns.”

Elsewhere, in its Alternative Lender Deal Tracker Spring 2019 report, Deloitte states: “Surveys show that the private debt asset class as a whole is forecast to hit $1.4 trillion globally by 2023, passing real estate in becoming the third-largest alternative investment asset class after hedge funds and private equity.”

 

What makes private debt attractive to mid-market tech companies?

Private debt makes it easier for mid-market tech company CFOs to raise finance to support a specific need. For example, time sensitive and capital intensive M&A activities.

But that’s not all. Private debt relieves some stress placed on tech company CFOs who need to raise finance during the turbulent global economic and political environment. During these times, banks have little appetite for risk.

 

What are the advantages of raising private debt over bank debt?

First off, private debt funds can provide more flexible loan structures. In direct contrast to bank lending, private debt funds can offer unsecured options. They also consider non-amortisation loans.

Then because many private debt funds focus on sector niches, they can provide less restrictive terms, including less stringent covenant packages.

After that, close access to decision-makers means private debt funds can shorten credit processes and increase the speed of execution.

Unlike bank lending, private debt funds do not restrict your use of funds.

Beyond that, you can use private debt to replace, top-up and complement existing finance facilities.

Most compellingly, private debt allows companies to access more significant loan amounts without diluting equity.

 

For what purpose do high growth tech companies use private debt?

The most common uses of private debt in the mid-market include:

  • M&A finance
  • Refinancing
  • Growth finance
  • The buyout of minority shareholders

 

How can tech companies access the right debt funds?

In its Alternative Lender Deal Tracker Spring 2019 report, Deloitte noted: “The private debt market can be overwhelming, with numerous complex loan options offered to borrowers.”

To find the right private debt fund, and structure the right private debt finance deal consider talking to a specialist private debt finance advisory firm.

It is in a specialist private debt finance advisor’s interests to find and close debt finance deals with minimum strain on your time and resources.

And that’s what really matters.

 

And finally

If you’d like can help you to achieve your business goals, get in touch and we will set up a time to chat.

6 ways venture debt helps tech businesses facing a down round

What can your tech company do if it has lost value since its last round of financing and is facing a down round?

You feel like you’re banging your head against a brick wall.

Stock prices fluctuate every day. If you’re a public company, a shift in the economy can reduce company value which means you have to sacrifice more stock to raise the same amount of money in the future.

Comparatively, if you’re a private company, down round penalties can arise from a high valuation set on a previous round. Or an unexpected delay in a customer order that slows down growth.

They can even result from a strategic pivot to refocus efforts on improving long term value over short term gains.

The point is this. A down round doesn’t have to signal poor management and a company in distress.  

Fortunately, some investors recognise it’s not necessary to worry about a tech company’s worth today. They know it’s more important to build value that will last through good times and bad.

In particular, venture debt funders can help growth-stage and scale-up tech companies bridge the gap until they get back on track.

Let me show you how this works:

6 ways venture debt helps tech businesses facing a down round

 

1. Venture debt lets you hold on to the stakes in your business

Even if you’re facing a down round, of paramount importance to you is the ownership of your tech business. With each equity round, you wave goodbye to your shareholder interests.

Combine equity with venture debt, and you’ll reduce equity dilution and improve your payout further down the line.

 

2. Venture debt protects the control you have in your company

Venture debt lenders do not sit on the board of your tech business. And therefore do not interfere with your day to day operations.

 

3. Venture debt is more accessible to obtain than venture capital

Compared to equity, the due diligence process to get venture debt is vastly less painful.

Venture debt lenders typically loan to businesses that have already raised capital from institutional investors.  Therefore needn’t repeat the extensive due diligence process.

Unlike bank debt lenders, venture debt funders don’t require you to have a valuation, sign up to restrictive covenants and submit personal guarantees.

What’s more, they don’t penalise you for failing to reach EBITDA forecasts.

And another thing. You can access venture debt even if you have a complex company structure and your company is registered and trading in non-standard territories.

As an illustration of the speed in which venture debt deals are done: Recently Fuse Three completed an $18m, four jurisdictions, cross border venture debt deal in just four weeks.  

To keep the deal on track, and to minimise time spent on the due diligence process, Fuse Three prepared its client for business and financial scrutiny in advance.

As a result, the deal completed in the agreed timetable.

 

4. Venture debt provides immediate cash flow

High growth tech companies burn cash. It’s a fact.

And what profits they do make they plough straight back into their businesses. Because they know prioritising growth means when they mature, profits will be more significant and more substantial.

Venture debt helps propel companies forward during critical growth periods. You can use it to give you a bridge to your next equity round or to fund a trade sale or IPO.

More importantly, if you’re facing a down valuation, with the cushion and support of venture debt, you can put off your next equity raise until your enterprise valuation starts heading in the right direction again.

Better still, by leveraging venture debt to fund your tech company, you can reduce the amount of equity you need at the next milestone. And as a result, increase the value of your company.

 

5. Having venture debt sends positive signals to investors

Venture debt immediately strengthens your balance sheet and enhances liquidity.

What’s more, when you secure venture debt funding, you show other investors that a debt fund is confident about your operations and ability to generate cash flow.

As a result, venture debt helps tech companies to build enterprise value and maximise it for their next funding round.

 

6. Venture debt strengthens your negotiating position

Negotiating a deal is hard when you only have one option open to you.

Venture debt gives you an alternative route to finance. Thus putting you in the driving seat so that you can secure the best debt and equity deal.

 

To sum up

If you’re looking for capital to give your tech company a bridge to the next

equity round, IPO or trade sale, but you’re facing a down round, the good news is that venture debt funding can help you to continue to build enterprise value.

You can use venture debt funding in tandem with equity financing to help you get to the next milestone, without having to worry about your company valuation and diluting equity.

Talk to a venture debt broker about the best way to structure venture debt to meet your requirements.

Venture debt is easier to obtain than you think.

What can we learn about funding from the martech landscape?

While it seemed like a trend that would never end, recent research is showing a big decline in going down the venture capital route with many tech companies opting for alternative funding methods instead. Why?

A deal with a VC may have appeared a better choice in the past due to low initial cost of capital, but taking on a VC brings with it a lot of stipulations. For one, as a business owner you dilute your ownership of the company, secondly, the VC’s aim is to sure your company is going triple their investment within seven to 10 years. Not always an easy task.

Funding Tech Companies

Martech Landscape

The Martech landscape encompasses a vast range of companies operating very different technology stacks and providing a variety of essential services to their customers. One estimate for the growth of the sector suggest there are 39% more companies in the space. They range from:

  • Advertising & Promotion
  • Content & Experience
  • Social & Relationships
  • Conference & Sales
  • Data
  • Management

 

The most intriguing fact for us in this vast group of tech companies is this number: 44.2% are private businesses with less than 1000 employees – without VC funding. That’s incredible to consider they are bootstrapped, self funded owner managers with majority shareholding.

This is a clear signal that the playing field for Martech has changed, no longer is the success of their companies connected to the portfolio of their VC’s, the market has opened up and allows them strive for success off the back of bootstrapping, and perhaps with the help of alternative finance that has no adverse effect on shareholdings.

Pay back

Martech owners have started to discover some of the downsides of taking VC money, take a look at Buffer, a social media sharing platform, that paid $3.3m USD to buy out the VC’s that had invested in the company. Video software company Wistia also took a bold step to raise $17m in debt to buy out investors as well.

Buffer’s co-founder Joel Gascoigne said: “Often, the VC path means a lot of sacrifices for several years. Founders push their teams in the hope it will work out, but it’s not guaranteed”.

The martech sector is leading the way in embracing alternative finance options for funding their growth. There are myriad funding options available for tech companies to reduce their dilution when accessing the necessary capital to scale up.

 

VC setbacks

For those companies funded by VCs, it’s often the investors that receive the majority of the money in an exit rather than the owners, meaning all the work you do goes to their benefit.

Tech companies and their VCs can find themselves operating with different priorities. VCs typically operate their 10 year life cycle plan with the aim of a quick exit, restricting the strategic growth options many tech companies would be better off pursuing. Some VCs will want to extract value and avoid commercial models which will generate the greatest growth opportunities for the founders.

 

The rise of the bootstrapped (SaaS) Company

It’s fair to say that in today’s market, there is far more information and market knowledge accumulated for kicking off a startup, there are more people offering advice ‘who have been there’.  This has meant that bootstrapping has greater feasibility and seeking finance via alternative options to venture capital is highly advisable.

 

Funding tech companies

The recent advances and growth of the martech sector demonstrates the trend we are seeing across the technology industry as a whole; there are a variety of funding options available depending on the company’s MRR, growth and exit intentions. These funding options often come in the form of debt, giving additional non-diluting options to business owners looking to scale up and reach their next growth milestones.

 

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Venture Debt Terminology

With the ever increasing rise of venture debt lending in the UK, we are often asked by our clients what some of the terms mean, which prompted us to put together this easy guide to navigating lending terminology and the various levers used to negotiate venture debt deals.

The following list covers the common terms relating to venture lending, but each deal structure will vary depending on the specifics of the borrower, the lender and the deal in question.

 

Closing Date:This is the date that all documents have been approved, conditions agreed and due diligence satisfied therefore, funds will be issued on this date.
Costs:The borrower is responsible to pay its own costs, legal fees and any out of pocket costs of the lender.
Break Fee:A break fee is there to ensure the transaction takes place and is put into action in the event the borrower defaults or breaks the agreement.
Availability: Most lenders require the loan to be drawn on the closing date, with the exception of tranche loans and delayed draws.
Maturity Date:A typical loan is valid for 24 – 50 months and is expected to be repaid by this time.
Maturity Fee:This is the end of term repayment unexpected on the loan maturity.
Repayments:Can be a combination PIk (rolled up intrest),  interest, capital and a balloon payment. Maximum of 48 months interest only.
Closing Fee:Some funds will have a fee for funding the loan which in most cases in deducted from the initial advance.
Prepayment Fee:This is a penalty for paying back the loan early, which your broker will calculate for you.
Interest Rate:The annual interest rate is split into monthly payments to the lender, either at a fixed rate of floating rate.
Financial Covenants: All covenants are outlined for each lending type and in some cases can be negotiated, for a full breakdown of covenants, read our Covenants Guide
Reporting:Lenders will expect to see a monthly financial report that shows cash flow, working capital and annual budget.
Observer Status:In some rare cases, the lender may wish to attend board meetings as an observer.
Warrants:Warrants are used by venture debt lenders to increase their return. Sometimes referred to as an ‘equity kicker’ warrants gives venture debt lenders the option to purchase shares at a fixed price in the future.
Security & Ranking:Taking on a venture loan means repayments to the loan will take priority over all over company loans and must be repaid first.
Legal Documentation:The lender will stipulate what legal documents the borrower must provide.

 

Top Uses for Venture Debt

 

Extending Cash Runway:The most common use for venture debt is topping up an equity round to extend the cash runway.
Insurance Policy:Venture debt can act as an insurance policy to ensure the company has the capital available to hit their growth milestones.
Preventing a Bridge Round:Bridging rounds come with convertible notes, therefore in order to prevent a premature bridge round, venture debt allows the company to reach the next milestone.
Acquisitions or Capital Expenditure:A classic use of venture debt is to fund the purchase of another company.
The mid way loan:As any startup will tell you, plans take longer than expected and cash is needed earlier than you have in the bank. Venture debt offers that solution to bringing capital in for those required projects.
Avoiding a downround:There will be times when growth has slowed and some time and capital is required to break through to renewed growth.
Bridging to Profitability:There will be a time when management do not want to dilute further and venture debt allows the company to be self sustaining.

SaaS Funding: The Importance of Churn Rates

While many companies focus their attention on future cash flows, for a SaaS company it’s equally important to keep an eye on your churn rates, how do they compare to your growth rates, how might they influence future growth? What impact does this have on your SaaS company?

What if we told you that for every 1% increase in retention, your company’s value could increase 12% in 5 years? So, it makes sense that for every percent drop in retention, the value of your company could fall by a seven figure sum. This could severely affecting any potential valuation of your company and the avenues available for future growth.

Churn Essentials

Churn has a dramatic impact on your valuation drivers – MRR, growth rate, contribution margins, addressable market – which compounds over time.

Churn is measured as a % of your total business lost in a given period i.e. lost monthly customers cash value over a period of 12 months.

Churn can be measured a number of ways, but this is the simplest formula: Let’s say your customers generated £300,000 in MRR in year one, so how much did those customers generate in year 2? If they came in lower at £250,000, then your retention rate is £250,000/£300,000 or 80%, thus your churn rate is 20%.

 

How does Churn impact your SaaS business?

  • Compounding effect of churn – the biggest impact churn has is on revenue, compounding interest is in reverse in this scenario, which can become very big over time.
  • Growth rates – churn can have a huge impact on your company’s growth rate to the point where high growth SaaS companies are worth 6 -12 times annualised revenue whereas slow growth companies can achieve only 2 – 4 times annualised revenue. It makes a big difference!
  • Revenue predictability – churn can have a drastic effect on the future cash flow predictions. If your future cash flows are unpredictable, higher discount rates are applied thus driving down the value of your company. 

 

For every 1% increase in retention, your company’s value could increase 12% in 5 years

 

Know your competition

‘Keep your friends close and your enemies closer’ is the saying… and this rule should apply to knowing what your competitors are doing; if they doing something well, how you can emulate it?

Factors driving churn are multiple: choosing your target customer base; better on-boarding, relationship management etc. It’s finding the sweet spot that works for your company and evolving it.

 

What are SaaS companies doing to manage churn?

  • 4 out of 5 have a C-Level or VP in charge of customer success. Even startups with less than $1m revenue have someone overseeing customer success.
  • Retention is the highest priority  – acquire new customers and keep them.
  • Companies who pay more attention to churn saw an improvement on future cash flow predictability.

 

Summary

No two SaaS companies are the same and how they manage churn and retention is what sets them apart. If churn is an issue, you need to implement changes immediately, because the compounding effect it has on revenue over time can have a drastic effect on business.  

What is important to understand is the quantifiable impact of churn and how to manage it. At the end of the day, you do not want to be looking down the barrel of a 7 figure drop in your company’s value.

Having an understanding of  churn rates and how this affects your customer acquisition model is important when thinking about the future growth of any SaaS company. Investing time and resources in reducing your churn rate can pay off hugely in the future for a growing business.

Fuse3 supports SaaS companies in accessing growth finance, often to invest in customer acquisition and success and achieve continued, strong growth.

Get in touch if you would like to see how your churn metrics affect available debt financing for your SaaS company.

 

Glossary of Terms – Venture Debt Terminology

When you reach the stage of raising funding to advance your business, it’s important to know the terms that you’ll face when entering discussions with your broker. They’re generally quite straightforward, but for the avoidance of doubt, we have pulled together a list of terms and what they mean in this easy guide to navigating lending terminology.

Term Sheet

A term sheet is designed to help both parties to the loan to set out in advance the terms on which the loan will be made. It serves as a non-binding letter of intent which summarises important financial and legal terms. This includes quantifying the amount of the loan and its repayment. The term sheet acts as the basis on which to develop a more detailed, binding, legal document while avoiding misunderstanding.

Once the parties involved reach agreement on the details as laid out in the term sheet, a binding legal agreement will then be drawn up in the form of a Loan Agreement. While this term sheet reflects many of the provisions of the Loan Agreements, it should be tailored to fit the agreed commercial terms.

Interest Rates

Like any loan, there will be interest rates that the lender will stipulate for the investment amount. Given the size of these loans, you have to accept you won’t be receiving high street rates, but a rate that the lender chooses to charge for the use of their funds. The interest rate lenders normally apply to the principal is the cost of debt for the borrower and the rate of return for the lender.

Amortisation Schedule

When you borrow money, you need to know how much you’re going to pay back and when. The Amortisation Schedule outlines month by month the interest amount due for that period, together with the principal and the repayment amount.  At the beginning of the amortisation schedule, the repayment amounts first go towards the interest charges with the remainder allocated to the principal. Paying down the principal of a loan is the only way to reduce the amount of interest accrued each month.  

Balloon Payment or Bullet Payment

In the event you take a loan that is interest only or has an interest only period, at then the end of your loan term or at agreed period, there will be a  payment due to cover the capital that was borrowed and not repaid. Typically there will be additional options at the end of the loan, either to repay the capital, extend the loan or refinance the facility.

Legal Due Diligence Fee

The due diligence fee is paid by the borrower to carry out confirmatory due diligence by the fund or a third party to confirm what was presented is correct and true.  This is carried out after commercial terms have been agreed and a terms sheet has been signed, and prior to the loan documents being signed. The due diligence fee is agreed in advance and stipulated in the term sheet.

Quantum / loan Size / Tranched Drawdown & Timing

Deciding the loan Quantum is the process the broker/lender goes through to assess how much money your venture actually needs. If they decide the amount sought is too high, rather than offering a lower amount, they may dictate a ‘tranched’ process, whereby money is released periodically when milestones are achieved. This way a company with a weak cash flow can take money in stages to allow the serviceability to scale with revenue growth.

Security / Secure Debt

In the event that a borrower defaults on a loan, in normal situations the lender would seize collateral but debt lending depends on repayments and does not take collateral in its place, hence the reason for high interest rates to protect the loan. However, in the event the company files for bankruptcy, debt lenders hold a higher position in the liquidation queue and can recoup unpaid debt this way.

Venture Debt Equity Warrants

In finance, a warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed price called exercise price until the expiry date.
In addition to interest charges Venture debt providers combine their loans with warrants, or rights to purchase equity, to compensate for the higher risk of default. Venture debt warrants typically are only exercised in the event of a Trade sale or IPO.

Financing Growth Without Dilution

Financing growth without dilution

Most tech companies are unique in the way they perform and the way they operate, given that the scope of the company is developing technology that does not (always) have a dollar value to it. So pre-profit tech companies are dependent on raising money to allow the company to grow and support continued rapid growth.

Being a unique tech company means that seeking funds has to come from sources that are focused on innovation and supporting growth for companies looking to scale.

What is Dilution?

Let’s say most tech companies have at least 2 founders, thus 2 shareholders, but it’s unlikely a mature company operating with 100 engineers, turning over £20m only has 2 shares. They probably went through various funding rounds and in return gave away equity as way of repayment. So, let’s assume most companies are looking at 45-60% ownership after all the equity they have given away raising funds.

Seeking funds without diluting shares

It’s almost second nature for tech companies to fund the growth they need by seeking further funds. It gets to a point where the founders and board members do not want to dilute anymore shares in the company, ultimately giving them even less control over the business.

This is why CFO’s are increasingly looking to finance growth without dilution. Mature companies with consistent profits with a track record of growth, have the bargaining power to seek funding that does not take away further control, and they are right to take this direction.

Types of Growth Finance

Finance without equity can come in many shapes and sizes depending on the scenario that your company is going through, whether you’re looking for funding an acquisition, a bridge between loans, cashing out etc… These are the most typical types of finance options you’ll be presented with:

  1. Venture Debt – Funds are paid back (plus interest) over an agreed period and you don’t dilute your shares. Once the money is paid off, you no longer have a relationship with the lenders. We help you keep your equity while still getting you the cash you need to grow.
  2. Growth Finance – Expanding your company is complex. Growth finance comes in a number of solutions and we’ve made it our mission to understand all the nuances of standard (and non-standard) financing methods and funding sources to guarantee we can get you the best deal.
  3. SaaS Lending – Saas lending is available in excess of £1m without sacrificing ownership if you are revenue generating. We have products that are specifically structured to take into account the unique growth models and balance sheets of SaaS providers.
  4. Acquisition Finance – Debt financing for acquisition comes in many forms and sometimes a blended approach is the best solution. We are experienced in working with a specific deal structure to ensure the acquisition is smooth and funds aren’t wasted.
  5. Intellectual Property FundingReleasing the value of your business’s Intellectual Property (IP) rights is a novel way to inject cash back into your business. We work with specialist funds who understand the value of IP in technology companies and have specialist products to enable future growth, without diluting your ownership.

 

We’ve only pooled a small list together here, to demonstrate there are multiple options available to your company that do not further dilute shares. There are many ways we are able to negotiate and  structure deals to provide the best debt solution for your business, ensuring you get the best deal and the greatest opportunity to fund the growth of your business.

To find out more about the options available for your business and how we can help get in touch with Russell Lerman, CEO of Fuse3. With hundreds of deals worth of experience he has expert knowledge in securing debt funding for technology businesses.


 

You may also be interested in:

  1. Venture debt explained by Russell Lerman

  2. Understanding the value of your IP

  3. What Debt Financing is available for your tech company

     

    Talk to us – to find out if you qualify.

The weird and wonderful tasks your broker will do for you

We all know that a broker is the middleman that sits between you and the lenders and when your tech company needs that extra funding, it is your broker who is going to do everything he can to make sure you get the money.

Your broker is incredibly important, his specialist knowledge, connections and experience in securing alternative finance for tech companies is what guarantees the best possible funding options for your company. Putting the best options on the table increases your chances of success and demonstrates the value of his fees.

 

Brokers differ greatly from each other and you want to make sure you’ve chosen the one who has the “art of closing the deal”.

 

Venture debt broker Russell LermanTo get a full picture of the level of work your broker will go to for you, we asked Investment Director, Russell Lerman what a typical funding application looks like:

Time is money

When a company approaches me to seek funds, I’m on the clock meeting lenders generating results for them. They need to focus on running their business and not worry about who or where to look for funds.

 

Filtering the complexities

It’s a complicated world out there, and I filter that into easy to understand options for them. Lenders can throw all sorts of questions at the company and I make sure every answer is appropriately presented and addressed.

 

Different Finance options

Each tech company has its own issues, and I know which lenders like those issues. I talk to Specialist VC Debt Funds, Boutique Investment Banks, Asset managers from all over the world. These lenders have a keen interest in tech companies, so I come back to the client with three offers or more. Yes, three!

 

Negotiation

When I come back with three options, I’ve worked to getting not only the best price but the best deal to suit the company now and in the future, as opportunities and the business landscape will inevitably change.

 

Leverage

When you have options you have a power to walk away from the deal and with that power, you can structure the deal the best way for your company. It’s important the relationship between the client and the lender stays friendly. We stay firmly in the middle to make sure the two sides never clash – never underestimate this critical part of the deal!

 

Pitching

I’ve had enough conversations in my lifetime to know what the lenders want and don’t want to hear. As an owner, CEO or CFO, an outside perspective brings clarity to the message. It is a very specific message for a specific purpose and it needs tailoring. Not all the lenders are tech specialists, so I know how to steer the negotiations explaining sometimes complex tech businesses. Fundamentally, they want to know strong management teams are in place and they look at the numbers. I keep client emotions at bay and steer the deal to get results.

 

Relationships Matter

With the amount of deals we handle per month, it’s no coincidence that we know the lenders well. They want good deals and we bring them to them. It’s a win win for everyone. The mistake borrowers make is thinking they can approach them directly. It’s a fickle world out there and can be unpleasant answering sensitive questions about your company you love and protect. There’s a reason going direct doesn’t bring good results.

When you have the right broker on your side, it makes the process smoother, efficient and successful. Fuse3 only deals with alternative finance for the tech industry, we know the market well and we know the lenders well. Together this has given us a track record in securing funds for hundreds of tech companies.


To get a quick overview of venture debt, read Russell Lerman‘s interview: Venture Debt Explained in 7 Questions

Have a look at The Fuse3 Path to Funding

Talk to us to find out if you qualify – it could be now or in the future

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