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Business Credit Workshop

Date post: 25-Jan-2017
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14
How to Evaluate Your Business Credit
Transcript
Page 1: Business Credit Workshop

How to Evaluate Your Business Credit

Page 2: Business Credit Workshop

2

Strictly Confidential

Today’s Agenda

Learn how to evaluate your business credit

Use our framework to identify areas for development

Evaluate seven key business metrics

Take action of your business’ future

Page 3: Business Credit Workshop

3About the Presenter

Camino Financial Co-FoundersSean Salas, CEO (right)Kenny Salas, VP of Operations & Finance (left)

• Co-Founder & CEO of Camino Financial, a financial services platform for small businesses

• Worked in private equity where he evaluated over 150+ middle market businesses and managed companies with over $250 million in combined revenue

• Former Investment Banker at UBS, where Sean participated in several M&A and financing transactions of global consumer products and retail companies

• MBA candidates at Harvard Business School; BAs in Political Economy of Industrial Societies from the University of California at Berkeley

Born from small business. Passionate about building small businesses

Page 4: Business Credit Workshop

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Strictly Confidential

Key Trends in Small Business

• Businesses recovered from recession, but concerned about capital spending, hiring and higher healthcare costs

• Owners find it difficult to get access to capital

• Technology a key catalyst for growth, cost savings and COMPETITION

Page 5: Business Credit Workshop

5The Four Key Areas to Evaluate Your Business

Credit Histo

ry

Business Attributes

Capital Structure

Cash Flow

Page 6: Business Credit Workshop

6Assess: Cash Flow

• Bigger is Better (and less risky)

• Smaller businesses are more susceptible to risks:

Limited resources to compete against larger competitors

Early stage (or unproven) business

Undiversified Limited benefits from scale Undercapitalized

Annual Gross Sales

Page 7: Business Credit Workshop

7Assess: Cash Flow

• Net Profit (Pre-Tax) = Sales – COGS – SG&A – Other Expenses

• Margin indicative of value delivered to your customer and operating efficiencies

• Benchmark against your competitors (see BizStats.com)

Net Profit & Margin

Page 8: Business Credit Workshop

8Assess: Capital Structure

• Benefits of debt

Accelerate growth Tax shield Build credit history Diversify personal net worth

• Max Debt Capacity

Leverage up to 80% of cash flows generated over the life of the loan

The Optimal Amount of Debt

Page 9: Business Credit Workshop

9Assess: Business Attributes

• What percentage of gross sales do your largest 3 customers generate?

• Issues with High Customer Concentration:

Lose focus of small customers Neglect generating new business Lower profitability

Customer Concentration

Gross Sales by Customer

Top 3 Customers

Other Customers

Page 10: Business Credit Workshop

10Assess: Business Attributes

• Business dependent on performance of “key” months

• Hard to make a seasonal business not seasonal

• However, you can manage seasonality: Working capital management Financial planning

Seasonality

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Revenue by Quarter

Page 11: Business Credit Workshop

11Assess: Credit History

• On-Time payment history

• Current level of debt

• Types of credit accounts

• Length of credit history

• # of recent credit applications

• History of delinquencies

Personal Credit (FICO)

FICO Range Assessment Risk760-850 Excellent Very Low Risk

700-759 Very Good Low Risk

723 Median Score

660-699 Good Mid Risk

687 Average Score

600-659 Not Good High Risk

500-599 Poor Very High Risk

Page 12: Business Credit Workshop

12Assess: Credit History

• Takes credit to build credit

• Evaluated by several distinct credit rating agencies using different scoring scales

• Reputable credit agencies

Dun & Bradstreet (“D&B”) Experian Equifax

Business Credit

Business Credit Score

Demogra-phics

Public Records

Credit & Payment History

Page 13: Business Credit Workshop

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Strictly Confidential

Next Steps

Review your business credit using our framework

Evaluate resources available to build credit

Invest in your growth

Page 14: Business Credit Workshop

Q&A Session

Together Moving Forward

Contact Information:

Visit us at: www.caminofinancial.comCall us at: (800) 852-0655


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