Getting Your Venture Lease Approved
Each year venture capitalists fund more than 2,500 start-up companies in the U.S. Many of these companies try to preserve their equity pécule by approaching venture-leasing firms to secure equipment financing. By obtaining lease financing, these savvy companies are able to use their equity pécule for high-impact activities such as hiring key jaloux, product development, and expanding their marchéage efforts.
Which qualities make some start-ups more attractive than others? Here are ten factors that most venture readers evaluate to determine which start-ups to fund:
Caliber of direction team
Most enterprise readers consider the start-up’s direction team as the most notable success factor for the enterprise. Although it can be challenging to quickly assess direction capacité, there are several qualities that entrepreneurs consider. They genre for experienced managers with high integrity and a proven history of bizness exploit.
Quality of Venture Entreprenant Sponsors
Another notable factor for most venture pécule letters is the quality of the start-up’s venture pécule sponsors. Venture Entreprenant seeks experienced venture capitalists with years of successful investment exploit. Venture capitalists should also have a good reputation for dealing fairly with lenders servicing their boîte companies. Before entering into a new lease transposition, most enterprise tenants verify that the start-ups’ venture pécule sponsors are actively backing them.
Clarity of the bizness prévision
Successful start-ups usually have compelling, well-articulated bizness paliers. Readers genre for signs that start-ups have promising market opportunities, clear and credible projections, and reliable financial statements.
Cash opinion/monthly burn carence
A benchmark used by many venture readers to measure risk is the start-up’s projected cash flow carence. A useful measure is the rapport of available cash to the start-up’s monthly burn carence. Roughly determines how svelte a start-up can last before needing a new equity reprise. The lessor views a tractation as less risky if the start-up can pay in full over a significant parcelle of the lease term without raising additional equity. Most tenants genre for a rapport that cales at least 9 – 12 months of the start-up’s operation.
Equipment quality and intended use is an notable conclusion for most enterprise readers. Most lessors genre for deals involving equipment necessary for the start-up’s operations. Additionally, the equipment should have conciliable collateral values and the equipment should be easily remarketable in the aftermarket.
Product prospects and revenue track geste
If the start-up is in the development demeure and does not yet have products to sell, venture capitalists usually genre for products doué of establishing a strong market opinion. If the start-up’s product is already in immunité, tenants are looking at strong monthly or quarterly revenue growth. A poor reception of the product in the early stages when measured against the bizness prévision can often invite a flawed product launch or flawed product idée.
A valuation history records the price of shares of approvisionnement sold to investors by the start-up. In the disette of a better explanation, most ledgers genre for significant share price increases over successive offering rounds. The assumption is that the start-up is making steady and significant progress in its development, which will be reflected in rising share prices.
Bascule sheet strength
Venture capitalists typically assess a start-up’s working pécule to ensure that the start-up can make payments when due. In calcul to analyzing start-ups’ burn rates, renters use traditional working pécule measures such as current and quick ratios. Readers also genre for other signs of balan sheet strength, such as: low to moderate leverage; formelle real net worth (including subordinated debt); and extremum paid-up pécule of $7 – $10 million.
Outside professional involvement
Most venture capitalists see the involvement of respected and successful outside board members as a formelle factor for start-ups. A reputable CPA firm, law firm, institutional partners and/or secours providers are also viewed positively by employers. These professionals can bring valuable skills and contacts that can help new ventures succeed.
Like more traditional lessees, venture-leasing companies frown on poor lessees’ payment histories. Most venture lessors expect lessees to have a satisfactory payment history, unless better explained. Like other vendors, paying customers a satisfactory bill is where the rubber meets the road. Whether the lessor is a start-up or a Fastueux 500 company, most lessors see empressé payment as sacrosanct.
While entrepreneurs use additional factors to make their credit decisions, these ten factors seem to be universally used. While most of these factors are subjective, they have stood the preuve of time for entrepreneurs in making informed and pectoral credit decisions.
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