Recently, I worked with a client that licenses a wonderful software solution to credit unions. A handsome baby boomer, this technically savvy-self proclaimed “geek” is an extremely smart gentleman. He had service contracts from customers he had been doing business with for years. Unfortunately, the language in the agreements actually hindered his ability to maintain steady cash flow. In addition, the lack of certain terms stagnated his ability to achieve liquidity. His initial request was for an equity partner in exchange for less than $ 200,000.
#Empower. Executive MIND: Not on my shift.
Contract law is a dizzying black hole of lost revenue for a lot of small business. Overwhelmed by the cost of legal counsel, websites with standardized forms flourish through-out the Internet. I found myself prey to the lure of templates. One-size-fits-all legal solutions were my start-up standard. Other spending priorities easily outweighed the $ 100+ per hour spend associated with retaining legal counsel. If a template contract was “usable in all States”, why shouldn’t it be good enough for 1st CFI? There are several reasons!
First, service based agreements are typically performance based. There is no product or merchandise to fail. The risk of a defaulted payment arises from the failure of the service provider to meet the expected outcome of the client. Therefore, the metrics of what constitutes as satisfactory end product is critical to avoid issues later on. Performance standards not implicitly outlined lead can lead to a lost of revenue as clients engage in partial or withholding payments. Template contacts cannot capture the specialized outcomes. Generic language can leave room for too much interpretation.
Secondly, there is an opportunity cost for reserving resources in order to insure proper allocation to meet contract needs. If the contract doesn’t outline penalties from lack of execution and/or prepayment guidelines, income streams of the company can be arbitrarily interrupted without recourse. Small businesses can spend countless hours preparing for a engagement that never comes to fruition. Time lost cannot be recouped, without correct contract language.
#Liquidity. Corporate BODY:
I recommended a revision of his contract language, this corporate entity will free its cash flow. How? First, add twelve and twenty four month terms. Then, include ACH / direct debit capability at a discount for major companies. Including the assignment of proceeds will allow factoring of individual invoices in case of emergency.
What is it? A way for smaller companies to cash-out contracts with larger companies.
Why use it? It’s less expensive than equity. Each transaction is custom and can be used to:
1. Provide equipment necessary to fulfill a service contract
2. Provide working capital to run your business
3. Develop infrastructure to facilitate contract fulfillment
4. Accelerate contract revenues
5. Much more!
When can you use it?
As long as you have a projected two (2) year agreement for a minimum gross revenue of $150,000, we can provide financing.
So, soon my client will have the liquidity he needs while avoiding debt. His Corporate BODY is healing from past mistakes. His Entrepreneruial SPIRIT continues to thrive.
How do you get it this type of assistance for yourself or your network?
Contact us today: 855 LOAN-1ST (562-6178)!!