$1-2mil (Hypothetical deal only)

[D.T.]

Hi caveat emptor people

Just wondering about the thoughts of people on this forum.

If someone on here were to 'request' a fairly large sum of money, what kinda questions would we ask them?

I'd assume:

What do you want to do with it?
and, Have you done this before?
Whats the budget with the money?
What will ya do if what you want to do doesn't work?
and of course,
How / when will I be paid back, and how much?

(Just adding to that, how much would one expect to be paid back? P/I or IO, 7%, 10%, 20%?)

Anyone got any others? Realistic, Creative or otherwise

-Regards

Dave

 

[D.T.]

Hi,

PS, if this should be on Coffee Lounge or something then i apologise

-Regards

Dave

 

[Rolf Latham]

Hi D2

What security would be offered;

1. equity in the deal
2. First second and .... mortgages
etc

Ta

Rolf

 

[Simon]

To follow on from Rolf some of the questions I would be asking to ascertain this deal would be...

How much funding do they require?

When do they need the funding by, deadlines etc?

A description of the project.

How much of their own cash or capital is invested or at risk?

Who else have they approached for this funding?

What will happen if they don't get this funding?

Is this business/investment or for their own personal use?

How long have they been looking for funding eg 9 months, why have they not got it yet?

Do they have, a feasibility study, plans, council approval, written construction quotes and so on.

Will they give personal guarantees and if not why not?

Do they have an assets and liabilities list.

Have they paid their tax up to date?

Remember that return is equated to the level of risk. So you would set the rate depending on how risky the project is.

Something as safe as a bank term deposit would attract a similar rate whilst the hoighest risk you might accept would be much higher. 30% is not unusual for short term lending.

Cheers

 

[peteb]

has the bank refused them the money ?
if so then why have they rejected them ?
always worth looking at ....

 

[D.T.]

Hi

Wow, Thats a fairly comprehensive list. Tho i doubt many people here would lend that kind of money out even if the person had good answers for all those questions.

-Regards

Dave

 

[suggo]

I think your right about that Dave, I don't think I would consider it myself unless the 1-2mill was only 10% of my total worth.

 

[MarkB]

A couple of others:

- What is the legal structure being used for the venture?

- If I am effectively buying shares in a private company - are they preferential shares? (ie. where would I stand in a line of creditors)

- What is the (expected) IRR for the investment the $1-2m is being used for?

MB

 

[Puppeteer]

Here's a few more.

Monthly Cashflows for the life of the project.

Payback Period (banks generally like to see a payback period of less than a third of the total project length)

Assumptions used in the financial model.

Sensitivity Analysis (ie what happens if the price of the commodity falls by 20%, what happens if it goes up. What happens if there are labour strikes or if construction is delayed for 6 months)

What project guarantees will be given (ie engineers guarantees, and construction guarantees)

What sort of financing structure is desired. Equity sharing, Joint Venture, Cash Loan?

Proof that the idea will work (such as testwork, pilot studies, market research).

Are there any currency risks, and what exchange rate have you assumed.

What risks are there for the project, particularly risks that can't be controlled, such as political stability etc.

Are all of the necessary permits in place?

Has the project been audited by an independent third party?

I'm sure that there are others, but these are some of the hurdles that we need to deal with just for accessing company cash for projects, let alone raising finance through financial institutions or share offers?