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If your existing business needs money for expansion or development, you have likely learned that getting a loan of a million dollars or more takes planning and preparation. One of the most important considerations for lenders is how you can guarantee that you will pay them back. What happens when you get the loan and your project fails? What if you spend all your funds and have no more funds to go forward?
Think about reducing risk for the lender. How can you guarantee to your lender that you will pay them back with your “Exit Strategy"? I get calls from businesses that face this issue all the time. Almost always there is a way!
Lenders use the term “Exit Strategy” to describe what you will do to pay back the loan if your business plans don’t work out. A lender might ask, “What is your Exit Strategy?” They want to understand how the loan will be paid back if things don’t go the way you planned. And if you don’t have an exit strategy, it’s a pretty sure bet that no lender will take a chance on your business and not a million dollar plus chance either.
Exit Strategy examples are any assets that you can pledge, that would cover the amount of the loan and make it easy for the lender to liquidate quickly. Commonly pledged assets include like, real estate, commodities, securities, and bank instruments etc.
A creative way to deal with the “Exit Strategy” is buying a “Financial Guarantee Insurance Bond.” These insurance bonds are not offered in the United States, but are offered thru “AAA Offshore Insurance Companies.” These companies pool together their money to offer insurance bonds to business ventures anywhere in the world. The cost varies, but if approved the cost of the bond can be paid at the closing table from the loan proceeds. If your business were to fail, the lender will file a claim with the insurance company and would pay the remainder of the loan proceeds to the lender. This may sound like a free ride to you the borrower, but believe me they will scrutinize your business plan to the tee, they have a very high success rate, and don’t insure business plans that have any chance of failure. So, this expense should be included in your business plan.
I’m happy to speak with you more about “Exit Strategies.” You can contact me at 352-400-6477 or take a look at my website, www.brettonfinancial.com for more information.
It costs nothing to learn if I can help. I take no upfront fees.
If you decide to use my services, I am compensated at the closing of the transaction.