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SOS Case –A solid Pro Forma can trump past poor financial statements
A client was turned down for a loan at a local bank to fund the purchase of a small business. An SBA appraiser had determined the business had no value based on the past lack of profitability. SOS analyzed the business, restructured it, created a pro forma of its future, and with that pro forma gained the financing at the client’s same bank. That company executed the pro forma and has paid off the acquisition debt in full!
SOS Case –Private Funding can be a solution
Banks have rigid guidelines for loans. Each bank also has its focal strengths. Few like to have contractors where their receivables are subject to bond company priority as well as satisfactory completion of the company contracts. SOS has placed a number of loans where the loan has made cash flow and collateral sense but does not meet all the standard bank requirements. These private loans carry a higher interest rate. SOS just put together a wrap loan paying off a bank loan which would advance no additional funding. Thus the apartment owner could take out some equity for some personal issues which had sprung up.
Another solution is the EB5 program. SOS is deeply knowledgeable of the foreign investment opportunities, as the principle of SOS serves as the Chairman on a regional EB5 center. The EB5 program offers US citizenship for a family for a sizeable investment at risk in a US enterprise. Though the risk is often mezzanine level the interest is generally at bank or even lower interest rates. The cost of the loan upfront however is more expensive and time consuming.
SOS Case –Distressed Financing
Every business will eventually go through financial stress due to a number of reasons. These range from internal mistakes or issues, fast paced growth of company, to issues outside the control of the company. Though there are asset lenders who will loan against a percentage of the liquidation value of specific collateral such as account receivables or equipment, (pawn) distressed financing often needs more than some specific asset lenders will fund. (pawn) distressed financing is complex and requires a lot of tools and skills. It requires in-depth due diligence on the company done by a third party trusted by the distressed lender. After SOS determines the root cause and the right corrective action, SOS has then gained destressed financing to fund the corrective actions and right the company ship. This effort requires all the tools in the SOS toolbox.
SOS Case –Managing & Reviewing the Foundational Document to a Transaction
The same business will gain a wide range in valuation from different business appraisers. While some stick with simple but unrealistic rule of thumb valuation, such as a four- or five-time multiplier on EBIDA, or a lower multiplier on the higher discretionary spending amount, business vary far more than that. Homes can be closely analyzed to its comparable(s). Business have a myriad of differences. Specific company internal issues, such as financial controls, production management, personnel, client base, etc. It is also subject to things outside its control, from the changing technology, government regulations, the general economy, to pandemics. Further, homes are a known tangible asset that is valued and used. A business however is valued on its future cash flow it will produce. One can immediately see the eye of the beholder is critical and vast amounts of judgment go into that business valuation.
SOS is extremely adept at business valuation, utilizing both its merger & acquisition skills, its more simplified business brokerage affiliates methodology, as well as court-recognized appraising methodologies. SOS can also identify internal and external threats and opportunities due to its industry relationships and its due diligence training. SOS turnaround skills allows an in-depth analysis of the company’s present health beyond the mere financial statement, its opportunities, and its weaknesses.
SOS generally represents a company and thus does not do the appraisal itself. Further, SOS advises that clients have their bank order the appraisal for a number of benefits. SOS role is to use its appraiser, certified as an advanced business appraisal reviewer. SOS generally manages the company’s interaction with the truly independent appraiser, and then reviews that appraiser’s work, noting the strength and weaknesses of the appraiser’s financial statement normalizations, the projections, the utilized comparable, and individual company adjustments, and thus its discount rates or capitalization rate. The buyer, the seller, and the financing party are all basing their decision on that appraisal. SOS has performed this management and review for many of its clients who appreciate the holistic and fair analysis of an appraisal, and the viability of the future income streams every appraisal in theory measures.