DIC Excellence Series Presented by Salvus Advisors JLT

Raising bank finance for Service and IT companies

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How banks perceive ALL SMEs..

SMEs are perceived as high risk

High concentration risks

Key man risk Limited fall-back options Poor financial management & transparency Unable to articulate financing needs

Skip risk

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How are IT and service companies different?

Hardware (IT) and service companies slightly different

Both sectors perceived as higher risk.

Low entry barriers No exclusivity, low USP levels?

High stock obsolescence risk

Service companies : Dealing in intangibles Higher risk of commercial disputes

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The Preparation: If you are a Start up

By start up, any firm that is less than 2 years old

Begin by maintaining clean accounts

Use an outsourced accounting service provider Ensure you have good (cheap) software Get your accounts audited by a bank empanelled auditor Ensure your payment record is good

Open operating accounts with 2 right banks

Build good reputations with buyers/suppliers
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Start-ups, continued..
Balance sheet lending to start-ups, almost impossible now.

So what are your options?

Expensive parameterized loans Some structured trade financing MAY be possible

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Mature, 1st time borrowers

Hard work, even for mature companies, especially service providers Clearly identify financing needs as a bank would Prepare a brief but comprehensive business plan Put together a comprehensive information pack Identify the appropriate bank Get introduced, if possible

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Showcase your strengths

Identify your strengths. Consider whether you have:
High quality suppliers / buyers Some identifiable USP Established track record with suppliers & clients Good history of managing stocks & receivables Number of repeat clients Testimonials from suppliers/clients Process qualifications from international, reputed bodies Financials audited by reputed auditors

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Case study..1st time borrower

The client Logistics, freight forwarder, supply chain service provider Pros: Good client base Reasonable financials Fast growing Cons: Chunky exposures to few clients Slightly erratic track record No borrowing track record

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The SALVUS Solution.

Chose bank that understood service industries Structured financing based on company strengths Focus: performance track record and quality of clients Short duration of debt

Solution: to set up a factoring line for discounting receivables. Next step: to finance network expansion vide loans, once track record established.

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THANK YOU

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