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  Chapman Spira & Carson, LLC.

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Define Your Terms
The Criteria

The questionnaire below is designed to help you define your project from a financial point of view. We have listed below a series of choices that help you to define your project. We have given a short explanation of which each of our choices means. Define your terms, tell us where you are and give us whatever information you think will help us to formulate a plan.

Seed Capital

The raw stuff. I was sleeping in bed last night and a vision came down and it told me that there was gold buried in under the house next door. I need enough money to dig it out. Probably have to buy the guy's home to start with. Seems to me that we will need about a quarter of a mil for this.

CSC: Although we are thought of as extremely early stage investors, this plan is a pipe dream and it would be of little interest to anyone under most circumstances.

Early Stage Funding.

Well, we have sketched it out and it looks OK from an engineering point of view. The patent attorney did a search and no one else has thought of anything like it. Joe, you know the guy that runs the plant near town says we can make this pretty inexpensively and he's drawing up some projections. I'm going to put the whole ball of wax into a business plan and see how it looks.

CSC: Maybe you've got something here. When you're all done with the business plan, send it in and we will have our production guys go over with you see how realistic it is.

Second Round Funding

The relatives really liked my idea and I was kind of always considered the protégé when I was young. So we rented the plant and got the patent. Thought at the stage we started to ship, that Henry down at the bank would like to help us out. Guess What? He won't even give receivable financing. Tells me something about not getting product liability insurance and we can get sued if something goes wrong. Anyway, the big bank upstate just bought them and they now have procedures, whatever that is.

CSC: Hey maybe we are on to something here. Have I told you fellows what an exit program is? That means, we really don't want to control your company and we don't want to control your company and we don't want to be minority investors forever once we give you this money, let's talk about doing an IPO, let's kind of call this financing a bridge to the underwriting.

Secondary or refinancing

CSC: Well, we thought you folks were all set. The company is making money hand over fist and the projections for the next several years are really terrific, what brings you fellows back?

The new CFO thought that this was an excellent time to call in our high cost debt issues and reissue the paper at today's lower lease back, on some of our real estate, in order to provide money for some expansion overseas.

Non-equity Secured Debt Financing.

We would like to keep the company in the family and not go public at this time. Potentially at a latter date to address estate taxes and the like, we may consider it. In the meantime, we would like to pledge our assets, receivables or real estate to get some money for expansion. This could come from a bank or finance company, whoever will lock in a good rate for us for the period we need the money with some pre-payment privileges.

Convertible Debt

The rate you quoted on the loan against the company's assets is just a little too rich for our blood right now. Why don't we talk about giving the financing institution the option of converting their loan into a piece of the company if they continue to like what we are doing?

CSC: The bank likes your idea of letting them convert into some equity, but it may be that it will wind up owning more of the company than you would like when it's all over. Why don't you consider issuing the debt instrument with a warrant attached to it that you will even receive additional funding down the road should they exercise that right. If they do not, you receive your loan at under the market rates.

Merger and Acquisition

We have to grow or be acquired; the economies of scale that worked in the past in this industry just don't hold water in this industry any longer. Could you take a look at us and see if you can make recommendations.

CSC: After reviewing the data you have given us, we believe that your analysis was correct. We have identified several people that would be interested in acquiring your company and they have agreed to keep your loyal employees on the payroll. There is also a job for the executives if they wish to stay. Both companies are public and their stock will take pretty good care of you and your family.

We also can offer you an alternative. One of the brokerage firms on the street is doing a roll-up in your industry. They are looking for a company that has been profitable for the last 5 years to lead the show. If you have an interest, we would be happy to introduce you.

PROCEED!

 

 

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