Panel member Jeff Anspach, CEO of the Confederated Tribes of Warm Springs’ Economic Development Corporation, provides a snippet of insight on accessing capital.
Business owners and entrepreneurs won’t want to miss the inaugural Business 20/20 Executive Breakfast “Access to Capital,” Sept. 9 at the Tower Theatre. This event will be exploring issues surrounding accessing capital, including some of the questions I’ve posed to regional financial experts in the Cascade Business News series of online previews. Panel member Jeff Anspach, CEO of the Confederated Tribes of Warm Springs’ Economic Development Corporation, provides a snippet of insight on accessing capital.
Q: At the various life stages in a company, what do companies do that impairs getting financing?
Where I see companies coming up short in terms of capital acquisition is that it is viewed as a short-term process rather than a life cycle event. The eye is on the prize of closing out a loan or round of equity but there should be a financial model that lets the banks/investors know that, given a particular set of macro drivers, there will be the need for another round. All too often the company quickly runs up against covenants and creates a liquidity event that is counter to a productive growth period. Going back to the bank with hat in hand is not going to work, especially if the bank perceives it as reactive rather than a planned event. It’s tough enough for them to make the first loan, but it’s going to be harder to make the second.
Entrepreneurs should immediately start working on that second round of financing—you don’t want bankers thinking for themselves, you want them to think about what you’re trying to portray. Frame the conversation so that it makes sense in the big picture: “If we hit our metrics, we’re going to be back, and it may be soon.” Just talking about it doesn’t really work—structure the whole conversation around a workable, believable financial model. And this is literally just an excel spreadsheet that’s digestible.
Q: Is there a role for the state and other nonprofits to play in helping create more access to capital?
There are always roles for the state or nonprofits to help level the playing field. In today’s capital markets, unless you are generating a significant amount of earnings, say over $10 million, you will have a hard time accessing cash. It can be done, but the spotlight will fall on the business plan and the management team, which is not easy to put together for a cash-strapped company. This is where the state and numerous federal programs can help make cash more accessible. This includes policymaking, loan guarantees, and providing grant dollars and seed funds. Certainly, if there’s going to be a growth industry in Oregon, then the state needs to be actively and gainfully becoming facilitators of growth.
Another way the state can encourage investment is to provide consistent policymaking, to help investors feel secure. Investors need some level of certainly that what they’re getting into will be stable for the foreseeable future so they can get a return on their investment and make some money. For certain industries, such as the tech sector and craft brewing, Oregon does make investors feel secure. But if you’re not in an established industry, you’re at the whim of political change.