The winner for me was the panel discussion on "Sources of Unconventional Financing." The stars of the show were Greg Salomon of Capital Partners, Dave Kocharhook from Riviera Finance, and Alan Tratner of Green2Gold and the California Coast Venture Forum. Thanks to moderation from Antonio Pizano of Pacoima Development FCU, Dave and Greg were able to explain the nuances of asset-based finance (primarily factoring accounts receivable and merchant cash advances) and vendor finance (primarily purchase order financing). Fully utilizing asset-based finance is a must for businesses moving physical goods. Entrepreneurs need to check out ABF Journal for tips. Retailers need to know that factoring breaks down into recourse and non-recourse factoring, where recourse factoring leaves the company liable for unpaid receivables. I'm not a retailer, so I enjoyed hearing for the first time that a factoring transaction is priced according to sales volume, average invoice size, payment timing, and other elements.
Alan wowed the crowd with awesome tips, as follows . . .
- Forming a C-corp structure provides flexibility when you need to grant sweat equity to minority investors or get funding from VCs or angels. VCs don't like to invest in LLCs or partnerships.
- The financial food chain for entrepreneurs includes both debt and equity funding. It runs from the 3Fs (friends, family, fools) through crowd funding, VC/angel backing, and even licensing and co-ventures. I had always considered licensing to be a form of revenue for a mature product rather than a financing option for something unproven, but some startups can apparently make a go of things by inventing stuff just to license out production.
- The success rate for businesses that spring from a formal business incubator is 90%. That got my attention. You can find an incubator focused on your business's sector at the National Business Incubation Association.
- Doing a patent search before you file for a patent of your own will help determine whether you'll end up reinventing the wheel.
I did hear one other comment during the panel discussion that I had never heard before. Alan said a business's brand identity counts as intellectual property. This is a twist on the old definition of a brand as an intangible asset. Apparently academic thinking on the subject of brand identity and ways to protect it has matured since I got my MBA nine years ago. Copyrights, trademarks, and service marks can now constitute a brand portfolio. How about that.
I needed to talk to a few of the banks who staffed expo booths here because I'm wargaming whether I'll need a small loan to fund a business project I have in mind. Please note that this project is super top secret and I will reveal it when the time is right. Let's just say it's a practical application of the resilient community paradigm. Anyway, Wells Fargo and TMC Financing were particularly informative. Wells Fargo offers cash-secured commercial and consumer loans that are useful for equipment purchases, and TMC Financing offers SBA 504 loans for purchasing real estate. I asked specifically if the SBA 504's requirement that a business facility be 51% occupied referred to the human proprietor's physical presence or merely the presence of continual business activity. It appears that mere activity is sufficient; if correct, that will be key to execution of the 24/7 presence my remotely-monitored project will involve. Hey reader, please don't take this as legal advice. Check with your own banker and lawyer when you start investigating loan terms and requirements.
I mentioned the free lunch already, but I will state for the record that the Hyatt Regency San Francisco prepares a decent chicken with risotto. I went nuts for the cheese biscuits and I would have scored a second apple tart if some latecomer hadn't sat down at the last minute. The keynote speaker, Dane Boryta of Bottle Cap restaurant, implored us to respect the cooking by cleaning our plates. Entrepreneurs know good stuff when they see it. VEDC needs to invite me to be a panelist next time so I can score some more free food.
Nota bene: None of the companies or institutions mentioned have given me any compensation or consideration for this blog post. My recollection of this conference is provided as a public service.