EntrepreneurialFinance-Ch11

EntrepreneurialFinance-Ch11 - Entrepreneurial Finance For...

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Entrepreneurial Finance For New and Emerging Businesses Special Edition James McNeill Stancill © 2008 James McN. Stancill - All Rights Reserved
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Chapter 11 SHORT TERM FINANCING INCLUDING EQUIPMENT FINANCING
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3 This is a discussion of borrowing from banks and finance companies using assets as collateral . First we will discuss banks and the various types of working capital loans they make. Next we will discuss the types of working capital loans made by commercial finance companies . Finally, we will discuss the differences between finance companies and banks . SHORT TERM  FINANCING
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4 But as a prelude to this discussion, we will discuss the legal forms used to secure an interest in assets. Those forms are based on the UNIFORM COMMERCIAL CODE SHORT TERM  FINANCING
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5 UNIFORM COMMERCIAL CODE UCC 1 - Financing Statement. who’s borrowing from whom, using what as collateral. UCC 2 - Security Agreement. a listing of the collateral; forms designed for A/R’s, Inventory. Lenders vary from very strict to quite lenient; depends on financial strength of borrower. UCC 3 - Inquiry form. used to see if someone has a Financing Statement on an asset. UNIFORM COMMERCIAL CODE
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6 The UNIFORM COMMECIAL CODE is one of the most important commercial laws that a country could have. With assurances that they can seize collateral , a lender is much more interested in making a loan. China could really use this. UNIFORM COMMERCIAL CODE
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7 1) SELECTING THE RIGHT BANK: Three kinds of banks Wholesale - in CA hard to find example; maybe Mellon First Business Bank, Manufacturers Bank Retail - People’s Bank of Pasadena Combination banks - Bank of America, Wells Fargo, CitiBank, Sanwa What is wanted is a good business oriented bank that knows – and wants – your business. likes to do business with middle market firms; experienced. Ignorance leads to “No” as an answer. THE PSYCHOLOGY OF  BEING A BANK’S CUSTOMER
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8 2) FINDING THE RIGHT BANKER: There is a debate whether a “loan committee” is easier on a business than a single loan officer. Important to have two loan officers , as one may leave the bank; if you only have one, all your rapport may go with the departing banker! Better to have a loan officer who has some clout. Good to have something in common with loan officer, such as age, school, etc. THE PSYCHOLOGY OF  BEING A BANK’S CUSTOMER
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9 3) BUILD RAPPORT WITH BANKER: Learn the banker’s Hot buttons ; for example, provide the financial statements on time. Bankers lend money to “people ”, not Companies . Remember, bankers lend
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This note was uploaded on 02/11/2012 for the course BUAD 497 taught by Professor Degravel during the Spring '07 term at USC.

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EntrepreneurialFinance-Ch11 - Entrepreneurial Finance For...

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