Bangalore, India (AHN) – Two leading business solutions companies are collaborating in an initiative to jointly deliver a warranty management and analytics solution for industrial manufacturing, automotive and high tech industries.

The collaboration of Wipro Technologies and Oracle aims to help reduce warranty expenses and fraudulent claims in the warranty sector.

“Around 4 percent of warranty claims are fraudulent, making it one of the biggest challenges the industry is facing today,” John Barcus, vice president for Oracle’s manufacturing industry business unit, said in a statement.

“We believe there is an immense opportunity to reduce the losses and an effective product warranty management solution is pivotal in helping reduce fraud-related losses,” he said.

The combined solution will leverage Wipro’s industry expertise and Oracle’s Siebel customer relationship management applications to help streamline warranty management for original equipment manufacturers and their suppliers, dealer service providers and contract manufacturers.

“We believe that a streamlined warranty process and analytics will allow customers to better predict their warranty exposure and better manage their warranty reserves,” stressed N.S. Bala, senior vice president for Wipro’s manufacturing industry SBU.

View full post on All Stories

Santa Monica, CA, United States (AHN) – Workout queen Jane Fonda is releasing new fitness DVDs 28 years after her first workout video. The Academy Award-winning star, now 72, has inked a deal with Lionsgate Home Entertainment to release two new fitness DVDs in November.

Fonda released her first best-selling aerobics video “Jane Fonda’s Workout” in 1982. Since then, she has started a fitness craze among baby boomers, selling 23 workout videos later on.

Her last video was released in 1995.

But now, she is ready to release two more titles of workout videos that are “geared to the over 100 million American baby boomers and older who are increasingly focused on health, wellness, vitality and longevity.”

“Jane Fonda: Prime Time Walkout” and “Jane Fonda: Prime Time Fit & Strong” will be released on November 30 by Lionsgate.

She said, “I feel I’m at the right stage of life to get back into the Fitness business and pass on all that I’ve learned about being fit over 50. And who better to join with than Lionsgate!”

View full post on All Stories

There are three financing options for most commercial real estate scenarios: traditional banks, intermediate lenders and hard money lenders. The primary rationale for a small business considering a commercial hard money loan is that traditional or intermediate commercial financing options are not viable.

In those situations where traditional banks and intermediate lenders both say “NO”, it then makes good business sense to explore under what terms a hard money commercial loan might be available. Many viable small business projects can be funded ONLY via a hard money lender. Before accepting “NO” from the traditional banks and intermediate lenders as the “FINAL ANSWER”, a prudent small business borrower should determine if a hard money lender will say “YES”.

Commercial hard money loans are typically completed more quickly than a traditional commercial loan. Compared to traditional bank business loans, commercial hard money loans will generally involve a higher interest rate (prevailing range of prime rate plus 4-8% for typical scenarios), higher fees and shorter-term financing (one to three years). However, because many hard money loans offer interest only terms, the payments can be lower than a fully-amortized loan with a lower interest rate.

Three common commercial financing scenarios using hard money loans are described below.

COMMERCIAL HARD MONEY LOAN SCENARIO # 1:
Low Credit Scores

Most traditional commercial loans have very strict standards for acceptable credit scores by the guarantors for a commercial real estate loan. Hard money loans are much more flexible and low credit scores are acceptable.

COMMERCIAL HARD MONEY LOAN SCENARIO # 2:
Need to Obtain Commercial Financing Quickly

Traditional commercial loans will normally require several months to complete. Hard money loans can be obtained within a few days in some situations. This difference will be critical if commercial financing is required within a short time frame.

COMMERCIAL HARD MONEY LOAN SCENARIO # 3:
Special Small Business Situations Not Easily Understood by Traditional Banks and Intermediate Lenders

• Foreclosure
• Bankruptcy
• Special Purpose Properties
• Tax Liens
• Losses
• Negative Net Worth
• Less than one year in business
• Environmental Requirements

For each of the three scenarios described above, a commercial hard money loan will involve shorter-term financing, higher fees and higher interest rates than a commercial loan from a traditional bank or an intermediate lender. However, the critical point which must not be overlooked is that for most situations covered by the three scenarios, commercial financing would be declined by either traditional banks or intermediate lenders. It is under these circumstances that a commercial hard money loan becomes a practical and viable solution for many small business owners.

Copyright 2005-2006 AEX Commercial Financing Group, LLC. All Rights Reserved.

Author: Stephen Bush
Article Source: EzineArticles.com
Hybrid and Electric Cars

Washington, D.C., United States (AHN) – The United States on Tuesday announced twelve finalists for the Secretary of State’s prestigious 2010 Award for Corporate Excellence (ACE) and the 2010 ACE winners will be announced at the annual ceremony hosted by the Secretary of State later this fall.

According to the state department communique, these U.S. companies were chosen from a record number of 78 nominations submitted by American ambassadors around the world. “ACE finalists are international business leaders who recognize the vital role that U.S. businesses play abroad as good corporate citizens,” it noted.

Since 1999, the Secretary of State has awarded the ACE and the department “is committed to working with business to further these best practices worldwide and to recognize efforts to improve lives at home and abroad.”

Out of the this year’s 12 finalists two each are in India and China, while one each hail from Mexico, Israel, Swaziland, Guatemala, Fiji, Costa Rica, Ghana, Armenia.

The details of the companies and their activities are:

Alta Ventures in Mexico – for the venture capital company’s work to open Mexico’s venture capital market; foster greater investment, employment, entrepreneurship, and U.S. exports; and share best practices in areas such as education, innovation, remittances, crime mapping, clean technology, health care, and information technology

Cisco in Israel – for the computer networking company’s efforts to reconnect the Israeli and Palestinian economies and people; build a sustainable model of job creation and economic development; and engage in several partnerships and initiatives to enhance technical capacity, connectivity, education, and opportunities for women and youths in Israel and Palestine

Coca-Cola in Swaziland – for the beverage company’s work to improve local communities’ water, education, and health; promote entrepreneurship; foster local science and technology initiatives; and demonstrate exemplary employment practices

Denimatrix in Guatemala – for the textile and apparel company’s environmental stewardship in reducing the environmental impact stemming from its production process; contributing to the development of the local economy; and reaching out to the community to help disadvantaged youth and the homeless

Fiji Water in Fiji – for the bottled water company’s disaster relief efforts; volunteerism; partnerships that focus on local health, education, and provision of water; and “carbon negative” approach to product lifecycle and conservation efforts

GE in India – for the diversified technology, media and financial services company’s fostering of local partnerships and volunteerism, supporting health, education, innovation and disaster recovery projects across India; exemplary employment practices; and promotion of cleaner, more energy efficient products

Intel in Costa Rica – for the semiconductor company’s contributions to revolutionizing science and technology education in Costa Rica’s public schools through volunteer programs and community leadership; volunteerism; and practicing environmental stewardship that benefits local communities through means such as innovative recycling programs

Mars, Inc. in Ghana – for the confectionary manufacturer’s improvement of farming methods, sensitizing communities against child labor, and promoting the overall well-being and sustainability of cocoa growing communities; building partnerships to advance community empowerment; and contributing to the sustainable growth of rural economies

PepsiCo in India – for the beverage company’s fostering of environmental sustainability through water conservation efforts, which has benefited small and marginal farmers; supporting the health and well-being of local communities; and providing important employment opportunities through training with a focus on diversity and inclusion

Qualcomm in China – for the wireless company’s initiatives in education, healthcare and entrepreneurship; improving economic conditions; and enhancing the quality of life for Chinese citizens, particularly in underserved communities

Synopsys in Armenia – for the software and programming company’s promotion of U.S. and foreign investors by showcasing Armenia as a potential informational technology (IT) hub; collaboration with universities on IT training programs; and reduction of pollution levels by planting hundreds of trees to counter recent deforestation

Tang Energy in China – for the energy company’s efforts to promote development and U.S.-Sino cooperation in clean energy technologies; enhance industrial energy efficiency; and provide student health and education opportunities

View full post on All Stories

Washington, D.C., United States (AHN) – The United States on Tuesday announced twelve finalists for the Secretary of State’s prestigious 2010 Award for Corporate Excellence (ACE) and the 2010 ACE winners will be announced at the annual ceremony hosted by the Secretary of State later this fall.

According to the state department communique, these U.S. companies were chosen from a record number of 78 nominations submitted by American ambassadors around the world. “ACE finalists are international business leaders who recognize the vital role that U.S. businesses play abroad as good corporate citizens,” it noted.

Since 1999, the Secretary of State has awarded the ACE and the department “is committed to working with business to further these best practices worldwide and to recognize efforts to improve lives at home and abroad.”

Out of the this year’s 12 finalists two each are in India and China, while one each hail from Mexico, Israel, Swaziland, Guatemala, Fiji, Costa Rica, Ghana, Armenia.

The details of the companies and their activities are:

Alta Ventures in Mexico – for the venture capital company’s work to open Mexico’s venture capital market; foster greater investment, employment, entrepreneurship, and U.S. exports; and share best practices in areas such as education, innovation, remittances, crime mapping, clean technology, health care, and information technology

Cisco in Israel – for the computer networking company’s efforts to reconnect the Israeli and Palestinian economies and people; build a sustainable model of job creation and economic development; and engage in several partnerships and initiatives to enhance technical capacity, connectivity, education, and opportunities for women and youths in Israel and Palestine

Coca-Cola in Swaziland – for the beverage company’s work to improve local communities’ water, education, and health; promote entrepreneurship; foster local science and technology initiatives; and demonstrate exemplary employment practices

Denimatrix in Guatemala – for the textile and apparel company’s environmental stewardship in reducing the environmental impact stemming from its production process; contributing to the development of the local economy; and reaching out to the community to help disadvantaged youth and the homeless

Fiji Water in Fiji – for the bottled water company’s disaster relief efforts; volunteerism; partnerships that focus on local health, education, and provision of water; and “carbon negative” approach to product lifecycle and conservation efforts

GE in India – for the diversified technology, media and financial services company’s fostering of local partnerships and volunteerism, supporting health, education, innovation and disaster recovery projects across India; exemplary employment practices; and promotion of cleaner, more energy efficient products

Intel in Costa Rica – for the semiconductor company’s contributions to revolutionizing science and technology education in Costa Rica’s public schools through volunteer programs and community leadership; volunteerism; and practicing environmental stewardship that benefits local communities through means such as innovative recycling programs

Mars, Inc. in Ghana – for the confectionary manufacturer’s improvement of farming methods, sensitizing communities against child labor, and promoting the overall well-being and sustainability of cocoa growing communities; building partnerships to advance community empowerment; and contributing to the sustainable growth of rural economies

PepsiCo in India – for the beverage company’s fostering of environmental sustainability through water conservation efforts, which has benefited small and marginal farmers; supporting the health and well-being of local communities; and providing important employment opportunities through training with a focus on diversity and inclusion

Qualcomm in China – for the wireless company’s initiatives in education, healthcare and entrepreneurship; improving economic conditions; and enhancing the quality of life for Chinese citizens, particularly in underserved communities

Synopsys in Armenia – for the software and programming company’s promotion of U.S. and foreign investors by showcasing Armenia as a potential informational technology (IT) hub; collaboration with universities on IT training programs; and reduction of pollution levels by planting hundreds of trees to counter recent deforestation

Tang Energy in China – for the energy company’s efforts to promote development and U.S.-Sino cooperation in clean energy technologies; enhance industrial energy efficiency; and provide student health and education opportunities

View full post on All Stories

A: Hard money is generally used as a bridge to allow the borrower or property to be brought into compliance with conventional financing guidelines or sold. It is generally a short to medium term solution (1-5 years) and it is used for all types of real estate: commercial, retail, office, industrial, raw land, construction, land development, multi-family, single family homes and manufactured homes.

Q: Why would anyone borrow hard money when banks charge lower interest and less fees?

A: There are many reasons why a borrower would choose to use private or hard money over less expensive institutional financing, but the following will address the most common uses. Speed of funding is the most common reason — banks typically take a minimum of 45 days to fund a residential loan, 60-90 days to fund a commercial loan, and 120 or more days to fund a construction or development loan. Private money, however, is typically funded within two weeks, and can be funded as quickly as 24 hours in certain cases. Another type of project suitable for private money is a property that either lacks cash flow to meet bank requirements or requires physical improvements. Banks will not typically fund a loan secured by a property that requires rehabilitation prior to its use, and thus the borrower will obtain a private money loan to purchase and rehab the property, and then payoff the private money loan with conventional financing. Sometimes a borrower will purchase a commercial property that has no tenants. Banks will not loan on such properties but private money will provide a bridge loan to purchase the property and provide the borrower with time to lease up the property. Once the leases are in place and have been “seasoned” for at least 12 months, a commercial lender will refinance the private money loan with institutional financing. Banks are also prohibited by law from making most types of raw land loans, so private money is practically the exclusive source of financing for raw land. Equity in the subject property or other properties owned by the borrower is another factor. For example, Coppercrest Funding http://www.coppercrestfunding.com loans based on the value of the property and not the purchase price, and is also able to cross-collateralize the loan with other properties, so we sometimes lend 100% of the purchase price.

Q: What are the interest rates?

A: Private money rates generally range from 12 to 14%. The rate is determined by looking at a combination of factors: (a) LTV ratio, (b) strength of borrower, (c) condition/desirability of property, (d) actual cash-in or real equity contributed by borrower.

Q: What fees are involved?

A: Hard Money Lenders charge a loan fee generally equal to 3 to 5% of the gross amount of the loan. There is also charge typical lender fees, such as a document preparation fee, a loan processing fee and an application/inspection fee. There are also third party fees involved, including escrow fees, title insurance fees and account servicing fees. CopperCrest Funding doesn’t not charge hidden junk fees, but some lenders do, so make sure you read the paperwork or have an attorney take a look at it for you.

Q: Can the fees be paid from the proceeds of the loan?

A: Yes, so long as there is enough equity in the project. Most often, all fees other than the application fee are paid from the loan proceeds.

Q: Is there a pre-payment penalty?

A: Generally hard money loans have a 3-6 month minimum interest requirement. For example, with a 6 month minimum interest clause, if the borrower repays the loan in 4 months, there is a penalty of two months interest. If the borrower repays the loan after six months, then there is no pre-payment penalty.

Q: How quickly can a private money loan close?

A: CopperCrest Funding have closed loans the same day when presented with a complete loan package, but we typically take one to two weeks. Since hard money is coming from private sources, and every deal is unique it is important to ask about closing timelines on a case by case basis, and each lender is different.

Q: Is an appraisal required?

A: Typically hard money loans require an appraisal, but if there is not enough time to obtain an appraisal and there are good comparable sales information then the lender can waive the appraisal requirement.

Q: Why do they call it “hard money”?

A: We have heard many explanations, but the most common answer is that the lending is based on “hard” assets as opposed to the borrower’s credit or income.

Hopefully this article answered some of your questions about hard money. If you are in a unique situation whether you have a great one of a kind investment opportunity or are facing a foreclosure because of an unexpected happening, hard money may be the solution for you. Remember, just like with any loan or mortgage, ask a lot of questions and read the paperwork.

Author: Matt Hartley
Article Source: EzineArticles.com
Humorous photo captions

A hard money loan is a type of borrowing in which a borrower receives loans based on the value of a specific parcel of commercial real estate. This means a loan where the lender approves the loan request by deciding upon the value of and equity in the assets, without spending considerable time traditional lenders spend on documentation and verification of borrower for the same amount of loan. The most important issue in case of hard money loan is that this loan involves much higher interest rate than other categories of loans.

Key Features of Hard Money Loan

While in traditional loans a lender spends considerable amount of money and time on verifying borrower’s credentials, his income, source of income, tax history, credit history etc, in case of hard money loan, lenders avoid the above procedure because the loan amount in hard money loan is based upon the value of the real assets or collateral anchoring the loan, therefore, hard money loan is provided at the least possible time. Hard money loans are also those loans that need to fund quickly and the borrower cannot afford to wait for weeks or months for a traditional lender.

Hard Money Loans: Key Factors

1 Fastest Processing

2 Not linked with borrowers’ credit record, income level, source etc.

3 Can be borrowed even in case of legal & operation issues

4 TERMS: Flexible loan terms between 6 months and 20 yrs

5 LOAN SIZE: £500,000 to £75 million

6 COLLATERAL: Real estate and other fixed or liquid assets

7 Special Situation Financing Structure offered for all type of commercial or residential real estate development that cannot be funded by the more traditional lender

Loan Structure

A hard money loan is provided when the related real estate is offered as collateral and the amount of loan is based on the quick-sale value of the property against which the loan is made. Normally, most lenders fund in the 1st-lien position, meaning that in the event of a default, they are the first creditor to receive remuneration.

The loan amount in case of hard money loan is decided as the a percentage of the quick-sale value of the subjected property. This percentage is called the Loan-to-Value or LTV ratio and typically fluctuates between 60-70% of the value of the property. Value, in this case is determined as ‘today’s purchase price’ This the amount that a lender could reasonably expect to realize from the sale of the property in the event that the loan defaults and the property must be sold in a 1-4 months’ time.Therefore, based on the above, a hard money lender, may structure a loan as follows:

68% Hard Money Loan

18% Borrower equity (cash or additional collateralized real estate)

14% Seller carry back loan or other subordinated (mezzanine) loan

Eligibility: Are you eligible for Hard Money Loan?
It has been seen that hard money loan is ideal for borrowers who are unable to borrow from traditional source. Such borrowers are often surrounded by legal & operational issues. In such cases, hard money loan providers solve the problems and get the property suitable for borrowing from traditional lenders. Though the type of property to be considered as collateral depends upon the lender, normally the following income producing and non-income producing properties are considered suitable for collateral:

Income producing Properties:

Apartments

condo/co-op conversions

retail/shopping/strip centers

mixed use properties

industrial, office buildings

hotels/motels

medical, mobile home parks and restaurants

Non-income producing properties:

land acquisition

development and construction

bank workouts, foreclosures and bankruptcies.

LOAN Amount and Interest Rate

Loan size varies from lender to lender but the normal range is £500,000 to £75 million on different categories of properties. Repayment duration is normally in between 6 months to 20 years. Interest rate is based on various factors such as loan amount, repayment duration, risks involved etc but usually remains in the range of 10%-13% with a low fees starting at 2%.

At time, there are few lenders who provide upto 100% loan but very rarely. Typically for a hard money residential loan, borrower’s 15% equity in land or liquid assets is taken as sufficient collateral. Similarly, in case of commercial property 25% equity is usually taken as sufficient security.

Loan Processing

Processing documents for hard money loan is easier and fast compared to documentation for other categories of loans. One can fill out the online application form from the website of different lenders or can phone these lenders’ representatives who provide fast service on call.

Author: Steve A Clark
Article Source: EzineArticles.com
Video news

Great! What’s “due diligence?

Due diligence is a thorough examination of available facts, references, books, records, etc. of your business and business plan.

And, what exactly should you expect during due diligence?

Skepticism…

Business investors want to be sure there are no skeletons in the closet and that your venture is not the next Madison Priest “black box technology” — a revolutionary technology that claimed to allow ordinary phone lines to transmit data into people’s homes at rates faster than fiber optics. By staging impressive demonstrations, Priest convinced private business investors and seasoned companies, such as Blockbuster and Intel, to invest money in his venture. In the end, Priest’s ‘magic box’ was nothing but a high-tech hoax.

In addition to a detailed analysis of your financial statements, business investors will hone in on four key areas: finance, management, manufacturing, and marketing. Specific concerns in each area are as follows:

Finance

Cash. Cash is king. It’s the lifeblood of all businesses – start-up or on-going businesses. Business investors know this. They will spend the time understanding your cash flow assumptions and, if you’re an existing business, they’ll analyze your cash management practices. Poor cash management or shaky cash flow projections are immediate red flags.

Profitability. Expect investors to compare your actual or projected gross margins from year to year. This provides a quick indicator of your historical or projected manufacturing efficiencies and pricing environment. It can also highlight potential control issues, excessive overhead, or under pricing strategies to capture market share.

Bank problems. Out of compliance financial ratios, scrutiny from banks, or suspect bank relations – personal or business – are all red flags to business investors about how you manage your financial affairs.

Outdated financials. The lack of monthly financial statements or detailed cash flow projections or, for an on-going business, statements that are not prepared on time are all indications of a loosely run operation or a lack of planning.

Management

Continual crisis. Business investors watch closely for signs of weakness in you or your management team. Constant interruptions by emergency phone calls and demands for immediate decisions are signs of disorganization and lack of management.

Substantial changes in key personal. Unusual turnover in key management positions can be viewed as a lack of leadership.

No changes in senior management for many years. An established company with little or no changes in the management team can indicate a stagnant business, not current in new methods or processes, or a very autocratic management style.

Lack of pride or enthusiasm. Seasoned business investors can just sense the true tempo and spirit of an operation and its management team. Ask them how they do it and they’ll tell you it’s a sixth sense or gut feel. Nonetheless, it is something they are looking for and expect to see and feel.

Manufacturing

Outdate methods and processes. Your manufacturing and service methods and processes provide a quick indication of your ability to compete in the markets you serve and shift gears if the business doesn’t go as planned. Even if you’re a start-up, business investors will want to know the methods and processes you plan to use to manufacture your product or provide the services you plan to offer.

Rejects. If you are already in production, investors expect you to know your reject rates, the problems causing them, and the quality controls you have in place. How you handle rejects is an important issue to business investors. Remember, rejects are not limited to only production rejects. They also include missed service calls, late deliveries, and other process failures.

Just in time (JIT). Inventory is often the first place business owners and entrepreneurs get into trouble. Too much of it and you can quickly run out of cash; too little and you’ll quickly start missing deliveries and losing customers. How well you manage inventory and understand it is a key strength business investors are looking for in the management team.

Sales per employee. The measure of overall productivity is a good, simple benchmark investors can use to measure your historical or projected performance against other companies in your industry. Questions like: What is it that you plan to do differently than your competitors to allow you to use the number of employees you use or plan to use? Why do you think you can earn more or less per employee than the average for your industry?

Marketing

Market share. Be ready to compare your expected market share or changes in it to your competitors. Remember to only measure the relevant markets you serve. Also, avoid justifying your market share by taking small percentages of extremely large markets. “Our projections only assume we get 1% of this billion dollar market” is one of the most meaningless statements a business owner or entrepreneur can say.

Trade shows. Investors will be interested in the activity and interest your company’s booth generates at trade shows compared to your competition. Some may even want to attend and observe the next trade show you attend. Be sure to take pictures, videos and conduct customer surveys to demonstrate and support the interest and activity surrounding your booth.

New products. What is the percentage of new products or services that generate future sales? How often will new products or services need to be introduced to maintain your market position? What is your success rate with new products and services?

Business investors are constantly trying to sniff out symptoms of trouble. It’s important that you never mislead or deceive them. Most investors have extensive business experience and regularly see or have seen many different businesses and industries. The questions they ask often stem from their real world experiences. That’s why it is important not to get defensive by their questioning.

Be prepared when potential investors want to get behind your business plan. Use this list to conduct your own review of your business. Then, like many successful business owners and entrepreneurs, take the time to tap into the knowledge and questioning business investors have to offer to improve your business and prepare for future investor meetings.

Author: Michael Elia
Article Source: EzineArticles.com
Provided by: Pressure cooker

The PassThrough Structure suits a company that has noteworthy management or proprietary assets, seeks to raise growth capital without selling a controlling interest, yet is not ready for a public stock market.

The Pass Through Structure simply places a publicly traded company (“Pubco”) in the middle between an institutional investor and the private company and enables them to invest in and to use their global resources to support the private company.

When a Pubco strategic partner is available, the PassThrough Structure is generally the least expensive form of financing because a strategic partner will always charge less than a financial investor.

A strategic partner in most cases has a deeper understanding of the industry, the competition, the distribution channels, and the risk facing the private company and because of this certainty will provide more favorable pricing to the private company.

The Pubco is typically motivated by the opportunity to acquire an asset or an application that enhances its core business. The Pubco may be listed on any exchange worldwide.

The PassThrough Structure thus works to the benefit of all parties:

- The Beneficiary private company receives growth capital while staying private and maintaining ownership control. The Beneficiary also benefits by having the Pubco as a strategic partner/investor. The transaction can close very quickly once all parties agree to terms.

- The Public Company benefits by acquiring an asset, product, service, or application that it believes enhances its core business. This application can often be a carveout of the Beneficiary’s core product line.

- Investor benefits by putting their capital to work in promising investment opportunities that would otherwise be unavailable to investors restricted to public market transactions.

Frequently Asked Questions

- What is in it for the Pubco?
The Pubco generally agrees to the transaction because it can acquire an asset or application that it considers important to its core businesses. If the Pubco is not acquiring a majority interest in the Beneficiary, it is generally best to carve out an application or distribution channel that can be exclusively owned by the Pubco.

- Who finds the Pubco?
The Beneficiary private company should initiate the relationship with the Pubco strategic partner or can retain an investment banker to do so. The key is having the Pubco understand the benefits of the application that they can control.

- Which Pubcos qualify?
Pubcos that have established business models and whose viability is not in question because of operating losses, fundamental operating issues, or capital structure.

- What are the terms for the investment into the Pubco?
Very similar to a PIPE transaction, so typically convertible debt or preferred with warrant coverage or an equity line with a substantial up front advance.

- What type of Pubco should we look for?
The Pubco who can benefit the most from the application provided by the Beneficiary is generally the best choice. Logical choices include existing or potential distributors, suppliers, or customers.

How Do You Approach the Pubco?
The Beneficiary tells the Pubco that an institutional investor wants to invest in the Beneficiary but has a charter restriction that only permits it to invest in publicly traded companies.

The simplest way to explain the structure of the investment into the Pubco is a PIPE with a specialized use of proceeds. The Pubco’s CFO normally immediately understands the transaction when presented in this format and will recommend it if he thinks they can control an important asset or application.

- How does the Pubco react when approached?
We have received these 4 responses in the past:
a) “Yes”
b) “No way” (the application is of little value to them)
c) ‘Yes, but can we get additional cash for ourselves?” (typically the answer is “yes”),
d) “Yes and we like the deal so much we will just invest our own money”.

- Is the cost of the PassThrough Structure higher to the Beneficiary private company?
No, it would not make sense for a Beneficiary to accept a PassThrough Structure if the cost of capital was less from another alternative.

- Who performs due diligence on the Beneficiary?
The Pubco as an expert in the industry is generally the most qualified to perform people, industry, and operational due diligence.

- Can the Beneficiary later become publicly traded on a European, Asian, or other stock exchange?
Yes, the PassThrough Structure does not affect a subsequent public listing.

- What are the steps to closing?
1. The Pubco and Beneficiary agree that there is a potential working relationship and outline terms.

2. The Pubco agrees to enter into a financing transaction similar to a PIPE transaction with the use, or partial use, of proceeds to be dedicated to the Beneficiary.

3. The Institutional Investor indicates how much financing it will provide to Pubco.

4. Beneficiary and Pubco negotiate specific terms for Pubco’s investment into Beneficiary.

5. The Institutional Investor confirms the Pubco’s investment intent in a phone call with Pubco.

6. The Institutional Investor writes term sheet to Pubco.

7. Following agreement with Pubco on terms, the institutional investor writes term sheet to Beneficiary.

8. Beneficiary and Pubco sign terms sheet, sign engagement letter, and The institutional Investor attorneys draft closing documents.

9. Final documents executed, escrow funded, and transaction closes.

Author: Alvin G Donovan
Article Source: EzineArticles.com
Provided by: Make PCB Assembly

The core to any proposed Islamic financing transaction is that Shariah (Islamic law) prohibits interest-based lending. Moreover, Shariah further prohibits investments in certain activities which are seen as being in violation of Islam, such as gambling.

However, in essence, the mechanisms of venture capital do not provide for interest-bearing lending. Rather, at the core of any venture capital funding is an agreement to share in the risks of the business venture in return for the profits derived from such business venture.

As such, rather than being contrary to Islamic law, many scholars hold that venture capital funding complies with one of the cornerstone principles of Islam: it provides much needed investment to start-up companies in return for potential rewards, while accepting the risks that may be involved in such a deal. This type of structure in Islamic Finance is called mudaraba financing that is used over many centuries in the Islamic world.

Structuring an Islamic venture capital deal

The most accurate translation of a mudaraba financing is a contract under which one person, the investor (known as the rabal-maal), brings financing and the other person, the entrepreneur (known as the mudarib), brings expertise and effort. Collectively they share the proportionate profit as per their pre-arranged agreement.

Fundamental to the mudaraba financing structure, however, is the fact that the entrepreneur cannot be placed at risk of losing any monetary investment/value. If the business venture were to fail, then the maximum the entrepreneur could lose is the investment they make in the business enterprise themselves (i.e., their own money); plus any time and effort they put into the venture. The reason why this is the case is because under Islam, you cannot loose what you do not contribute.

In addition, under a mudaraba financing structure, strictly speaking, the investor is not allowed to partake in the management affairs of the business venture in which they have invested, they’re simply an investor – period. Day-to-day and overall management of the business must be left to the entrepreneur.

Differences between Islamic and Western VC funding

While the mudaraba Islamic financing structure does provide for a form of venture capitalism, it also raises certain issues that Western venture capital funds may find un-easing.

One core difference between venture capital investments that comply with Shariah law and those more commonly seen in the West is the allocation of loss risk.

Traditionally, venture capital funds invest in high-risk businesses in which there is an above average chance that the business will not be a viable enterprise, but where the profit upside is huge. In most cases, this has concentrated around the area of technology companies, but today it could equally apply to other industry sectors; such as media and medicine. A recurring theme, however, is “high risk”. For example, each of Yahoo!, Google, Apple, YouTube and MySpace have, at some time or other, received venture capital funding. And for each of these successes, there have been a hundred failures!

Given that venture capital funds historically invest in high risk industry sector businesses, over time, venture capital firms have put in place a structure that allows them to exit from the investment: (a) with maximum profits; and (b) with minimum losses. As we shall see, under Islamic Shariah law, both of these create a problem. One of the first discussions that takes place for any venture capital fund looking to invest in a business is how they plan to exit from the business. All things being well, the chosen form of exit by the venture capital fund will be by way of an initial public offering (IPO) of the shares in the business to the general public. However, electing to have an IPO as an exit strategy in an Islamic venture capital investment financing structure is not permissible. Thus, an alternative mechanism needs to be considered.

On the flip-side, as previously mentioned, in a worst case scenario, if the business venture fails, the entrepreneur (mudarib) cannot lose more than the time and effort they have invested in the business. As such, in effect, the investor bears the brunt of the financial risk that the business will fail. Thus, traditional mechanism that would otherwise limit the venture capital fund’s losses, or would otherwise give the venture capital firm a preference over the other investors in the business in a bankruptcy scenario, such as with the use of a preference share structure, are prohibited under Islamic law.

The second core difference between a Western structure venture capital financing deal and an Islamic venture capital financing deal relates to the management of the business itself. In nearly all cases of venture capital investments in the West, the venture capital fund will bring in a team that either manages the business directly (“hands-on”) or carefully monitors the direction in which the business is being taken. Indeed, so important is this aspect of venture capitalism in the West that most advisers will tell entrepreneurs that if a venture capital fund is or not willing to undertake this role, and bring onboard the experience they have gained, then they should not select that venture capital fund as part of the deal. Given the limitations of mudaraba, a lot of scholars regard this as prohibited!

Author: Waseem R
Article Source: EzineArticles.com
Provided by: Wordpress plugin Guest Blogger