We have a few funds and investment banks that will consider start-ups and pre-revenue companies. However, these are tough deals usually requiring, at the very least, management that has proven to be very successful in the past. And even then, it is hard. We do have some offshore funds however that will consider a start-up pre-revenue company that can prove it will have sufficient profit to start repaying a loan within 24 months of funding. Obviously having contracts or LOI’s in place would be a form of proof.
However, there is another way.
Acquisition finance is hot right now and we have developed several Broker Dealer, Investment Bank clients and funds that provide up to 100% of the acquisition costs.
We are looking at 5 – 10 year terms and interest rates from 3% – 8%.
For those of you with startups and pre-revenue companies that want to raise money, we now suggest you find an acquisition target, let us get you the funds to buy the acquisition, and then after it is completed and you are a positive EBITDA company, we can take you to a broker dealer to raise money for your overall company. Your acquisition target should seamlessly integrate with your overall business plan so that you are not thrown off your main purpose line.
Now is the time to do your roll-ups and acquisitions with EBITDA. In all cases, EBITDA must be more than sufficient to cover loan payments. We suggest no more than 50% EBITDA is used to cover loan payments.
Many of our sources will let a public company or a company going public use stock as part of the payment. This is important if you don’t qualify for 100% financing as you will be able to use stock for the “cash” part of the required down payment in a 20% or 10% down situation.
All of our sources are different. Some will look at your FICO and others only look at your EBITDA and management being adequate to ensure payments will be made. Some require collateral and personal guarantees, some do not. Some situations will require that your company is going public or already public and some will allow you to remain private.
Do you have a deal that would qualify? Please let’s start with a teaser of a few paragraphs summarizing the salient points. This is very important. Let me know if you have anything.