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April 11, 2019 | Tom Ballard

Final “Rise and Grind” session for semester focused on debt-based capital

By Tom Ballard, Chief Alliance Officer, PYA

The fourth and final session in this semester’s edition of the “Rise and Grind” series hosted by the University of Tennessee Research Foundation (UTRF) and Three Roots Capital focused on using debt to finance a venture.

Held earlier this week, the discussion was moderated by David Bradshaw, Oak Ridge Area Manager with Pinnacle Financial Partners, and featured two panelists – Barry Curry, Vice President and Business Development Officer with Crestmark, and Bryan Kilday, Vice President and Commercial Lender at Renasant Bank. Crestmark, a division of MetaBank, provides what was described as “innovative financial solutions,” while both Pinnacle and Renasant are more traditional lenders.

Regardless of the nature of their operations, all three individuals emphasized a few key items for any company seeking investment capital.

“You need to build a relationship with a lender,” Bradshaw said. “Pick an institution you are comfortable with and build a relationship. Then, you can ask ‘What if’ questions.”

His advice was echoed by both Kilday and Curry with all three noting the importance of any financial institution’s Credit Officer also thoroughly understanding the business that is seeking the loan.

“It’s easy (for the bank) to say no,” Curry observed. “The more you can get us in front of you (to understand your business), the better it’s going to be.” There was even an example cited where a loan was likely to be denied, but the answer changed after the Credit Officer joined the Commercial Loan Officer in a visit to the company and learned more about the business.

Another area that the three stressed in one way or another was financial information – up-to-date, readily available, and complete.

“I cannot emphasize how important it is to have good financial statements,” Bradshaw advised, with Curry adding, “We call ourselves asset-based lenders, but we’re really lending on the paper trail.” He described Crestmark, the more non-traditional of the three financial institutions, as a “working capital and transitional lender. We get tied-up in your cash cycle. We’re able to lend on receivables and inventory. If you have a valid invoice (with a customer) and are (already) generating revenue, there’s a way to finance you.”

Another topic was skin in the game when it comes to loans.

“We try to get a personal guarantee on 100 percent of the loan,” Kilday said, with Bradshaw adding, “Do not expect to get your loan without a (personal) guarantee.”

Other topics discussed included:

  • Merchant cash advances which are a vehicle whereby a company secures upfront cash in exchange for a slice of future sales. “That world will lend money into almost anything,” Curry said. “Those types of loans get a chokehold on you. Try to avoid them if possible.”
  • Business line of credit. “I always recommend that my clients open a business line of credit,” Bradshaw said. “You might not need it immediately, but you eventually will.”
  • Trade associations. Curry said that the organization itself and individual members can be a source of leads on financing opportunities.
  • “”Our biggest risk is fraud,” Curry said. “We can deal with failure, but not if you lie, cheat or steal.”

Three Roots Capital is a community development financial institution that supports local companies with capital, advisory services, and introductions to its network of partners.

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