Bright Ideas for Business

Christmas Wishes and Plans for a Prosperous New Year!

We at IEV want to wish you an yours the very best as we all prepare for an explosive 2008.  In anticipation of the new year, we wanted to share a real treat for the season:
Christmas Greetings Blog posting by Cathy Mosca at www.tompeters.com on December 24, 2007.

The post relates 11 business principles that are also found to be true to baking cookies.

Absolutely Guaranteed Funding

With the news of the recent fund raised by IEV Capital circulating, I thought I would help answer the biggest FAQ of them all: "How can IEV Capital fund my company?"

The IEV Capital Monetization Program is designed to turn future revenue streams into cash today.  This concept applies to almost every type of business that services other businesses.  The crux of this type of funding is the guarantee.  It might seem unusual and you might think that "they don't do it that way in my industry", but in reality for the right price or concession, you can get the right guarantee.  Let me explain what the guarantee is...

The guarantee must include these elements:

• Irrevocable (cannot be canceled for any reason)
• Assignable (can be transferred to another entity)
• Sum Certain (exact dollar amount)
• Date Certain (paid on defined schedule)
• No Offset (the amount cannot be reduced for any reason)

Example: Corporate Payment Guarantee
This irrevocable payment guarantee for $100.00 is to be paid to ABC LLC in $10.00 increments per year on December 31st for ten (10) years beginning December 31st, 2007 and ending December 31st, 2016.  This total amount is not subject to any offset or holdback.  This guarantee is assignable upon written notice to the guarantor.

That language above can be worded differently so long as the meaning & interpretation does not change.  Also, it is common for those sentences to appear in the appropriate sections throughout the document.  The bottom line is that if the client does NOTHING, then the guarantor still PAYS.

 
What if the guarantor won't do it?  Well, the client can offer a lower cost, a lien option or a performance bond.  In the case of the lien or performance bond, the guarantor still PAYS according to the guarantee, but then recoups their expense via the lien or bond.  In any case, the guarantor must be willing to provide this "unconditional promise to pay" to the client.  It is up to the client to make the guarantor comfortable with issuing this guarantee.  I call it salesmanship. 

Financing a New Business

In a recent national press release, IEV CAPITAL announced that it raised a $1.83 Billion fund specifically earmarked for the Energy Industry.  While the fund targets specific types of projects in that industry, there is a common thread to the underwriting requirements: demonstrable future profitability. This requirement is as simple as it is profound. It can also be a lesson to start-up businesses.

So many businesses come to the IEV Group looking for help planning and financing their businesses that initially cannot demonstrate their future profitability. Sure they have proforma numbers and facinating projections based on layers of assumptions. This material is a good start, but far from qualifying the business for financing.

One way that any business (start-up or mature) in any industry can develop demonstrable future profitability is to secure contracts with payment guarantees from its major clients.  This is especially effective in B2B scenarios where the company seeking funding provides a product or service to a large investment-rated company. Through this methodology a brand new company who provides a new widget to a large investment-rated corporation can be financed. The age of the new company does not even impact its ability to be financed.

Often times, the investment-rated company is willing to provide the guaranteed contract because the product is so novel or because the supplier is willing to offer more favorable terms in exchange for the guarantee.