Wells Fargo
Capital Finance
Glenn Noble
glenn.noble@wellsfargo.com
(703) 462-2314
Government Services Group
McLean, Virginia
Discussion Points
Rules of the Road
Planning for Growth
New Biz Considerations
Capital Options
Success Stories
W. T. D. T. G. S.
Wells Fargo Capital Finance Overview
Businesses within the Asset-Based Lending (ABL) Group have
joined together under a common name.
Wells Fargo
Foothill
Wells Fargo
Business Credit
Wells Fargo
Capital Finance
Wells Fargo
PO Finance
Wells Fargo
Trade Capital
Wells Fargo
Distribution Finance
Wachovia
Capital Finance
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Wells Fargo Capital Finance
Who We Are:
 Wells Fargo Capital Finance “WFCF” is a trade name
used by certain asset based lending, accounts receivable
and purchase order finance services of Wells Fargo &
Company and its subsidiaries.
 Largest asset-based lender in the US.
 Over 1700 employees.
 Service over 2600 clients.
 Over $23 Billion in outstanding loans.
 Geographic reach throughout the U.S. and Canada.
 WFCF is comprised of 15 specialty financing groups with
multiple divisions which provide addition industry
specialties. (Government Services, Trade Capital etc.)
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Contract based working capital options VS. The Road Ahead
Cash Flow Revolving
Line of Credit
Tem Debt / Fixed Asset
Structure
Asset Based AR Financing Facility
Your Safety Rules of the Road – page 1
Expect your bank / capital partner to
understand your industry &
opportunities.
Avoid being an orphan credit or
largest client of your bank /capital
partner.
Be prepared to have “skin in the
game”
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Your Safety Rules of the Road –page 2
Historic performance is a good indication
of one’s ability in delivering on new
business. Objectively, is your staff able to
handle the contractual obligations &
deliverables for the new opportunities?
DO NOT confuse revenue and margin.
Know your true cost of delivery.
Have fun!! (lately that does not seem
possible)
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Planning 101 – Avoiding the potholes
 Poor management is cited most frequently as
the #1 reason businesses fail, inadequate or illtimed financing is a close 2nd.
 When expanding a business it is not enough to
simply have access to capital. Knowledge and
planning are required to manage it well. These
qualities ensure that ownership avoid common
mistakes such as seeking the wrong type of
financing, underestimating the amount
required, or miscalculating the cost.
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Planning – Before the award
Minimize need of raising sufficient capital
to ramp up for future contracts growth by:
 Internal business development forecasting
should identify and signal situations to senior
management.
o Allows for proactive review of significant operational,
personnel and financial impacts.
o Allows for contract negotiations with customer for:
• Invoice payment terms
• Extended delivery dates / start up
• Partial payment upon order placement /
commencement
• Progress payments based on specific performance
criteria
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Planning – New Contract
Your company has landed a new contract,
one that will result in a significant
increase in revenues.
The Challenge:
In order to fulfill the contract the
company must commit to additional:
People (payroll)
Materials (vendors)
Other direct related costs
(fixed assets, facilities)
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Planning – New Award challenges continued
Timing:
Before customer payment is received.
Working capital needed to cover
commitments exceeds:
 Cash on hand
 Resources of ownership
 Existing line(s) of credit
 Availability of credit card
 Vendor credit
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Planning – the presentation
Prepare financing request /
loan application (in advance)
• Nature of Business
• Company Profile
• Market served and growth story
• Management Summary
• Financing Request
• Use of Proceeds
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Planning - Due Diligence Requirements
Key Borrower Traits:
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Quality products/services
Positive past performance
Financially strong customer base
Management, Management, Management
Growth drivers (contracts, acquisitions, new markets)
Key Borrower Challenges:
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Sustained operating losses
Limited retained earnings / net worth
Poor or non-timely accounting/bookkeeping/invoicing
Excessive subcontractor reliance
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Asset Based Lending (Revolver) – wide operating range criteria
 Unmonitored (cash flow) Line of Credit
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Flexible draw method
Covenant heavy
Weighted by past performance
Quality (Audited) Financial Statements
 Borrowing Based Working Capital Format
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A/R and Inventory advances
Field exams (periodic)
Dominion of funds (assignments)
Limited financial covenants
Quality (Audited) Financial Statements
 Accounts Receivable Financing
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A/R collateral only
Billed and Unbilled Advances
Primarily service providers
Detailed invoice reporting
No financial covenants
Fixed Asset Finance
Used to generate capital (liquidity) from fixed
assets that are to be obtained or currently owned
by company, such as computers, equipment,
furniture and fixtures, vehicles, and real estate.
Banks, financing companies, dealers, and
manufacturers provide these more specialized debt
instrument.
Company’s credit standing and the quality of the
assets involved will determine the amount of
capital that can be raised and the terms under
which it is provided.
Specifics of the agreement will determine the
accounting treatment of these obligations.
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Purchase order finance – product oriented
Financing based upon your customer
purchase/ task order(s).
Typically based upon the credit worthiness
of your customer (Federal Government,
large corporation).
Prefer direct shipment to end user.
No execution risk.
More difficult to obtain if assembly or
manufacturing process involved.
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Success story #1
The IT Service Provider
 Service Disabled Veteran Owned Company
 Established in 2002
 Revenues were flat from 2006 to 2008
 Became a client in 2008
 Revenues in 2008 $15,000,000
 Profit in 2oo8 $850,000
 After one year
 Revenues in 2009 doubled to $29,000,000
 Profit in 2009 increased over 3 times to
$3,000,000
Success story #2
The Small Engineering Company
 20-year-old company looking to diversify its client
base to include the Federal government.
 In 2008 the company was awarded a large multiyear contract with the US Dept of Defense.
 Became WFCF client in 2008 during the contract bid
process.
 Revenues in 2007 $2,000,000 / Profit $13,000
 Revenues in 2009 $28,000,000 / Profit
$3,000,000
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Success story #3
The Security Company
 An SBA 8(a) Certified Company wanting to grow by
bidding on larger Federal government contracts.
 Became WFCF Client in 2008 and began bidding
larger contracts.
 Revenues in 2007 $2,000,000 / Showing losses
 Revenues in 2009 $30,000,000 / Will show a profit
 With the financial backing of the Government
Services Group at WFCF, this company was
recently awarded another large contract and will
again double their revenues in 2011.
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Conclusion – it can be done
•The financing options are NOT mutually
exclusive as combinations can be very
effective.
•CAUTION: significant legal and
operational differences.
•The terms of some borrowing
agreements may limit your ability to take
on additional capital and they should be
entered into only as part of a coherent
financing strategy.
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Questions?
Thank you.
Glenn Noble
glenn.noble@wellsfargo.com
(703) 462-2314