Royalty exchanges are ideal when strong historic financials can be shown. Usually evaluated alongside additional points of leverage. A Merchant Cash Advance can be viewed somewhat as a hard money loan for businesses. Leveraging a percentage of future credit/debit card sales with fixed daily deductions. Somewhat of a 'last resort' solution for our clients, but still very useful & widely used when advantageous.
Joint Venture arrangements are the first to be evaluated, as either truly a need or not. Once we've determined the need (usually our clients come to us already with a JV; or are aware they may need and request our blended services) engagement begins after agreement is signed. Clients should expect a standard evaluation of liquidity, assets, relevant experience, etc. Joint venture arrangements, usually tied as a blended request, are of the most time-consuming for us to arrange. Again, requiring a lot of time & care.
Both requiring ownership/partnership interest in the borrowing entity. Preferred equity is simply an exchange for future returns. Typically,10-12% co-harmonious with agency senior. Investors are typically most conservative when evaluating. Profit sharing agreements, truly deal dependent, is generally a 50/50 split of excess profits after payment of preferred return, return of both the senior equity & the sponsor. Mezzanine is considered by most to be a blend of preferred equity & classic bridge debt. Senior to preferred equity, & in most cases cheaper than preferred equity while giving up less ownership. Preferred equity is most favorable for long-term stabilized projects or companies seeking a cash influx. On the business side, a whole suite of additional options or points of leverage become available.
Blended Capital Advisory is a very intricate & detailed service requiring time, dedication, & care. How it's presented & packaged plays a major role in gaining attractive capital interest. Depending on the dollar amount, & the blended intricacy, NJL will often spend well over 100 hours allocating resources for each request. As standard cost is anywhere from .5-2% on the funded amount, NJL will typically collect ~.01% up front non-refundable for internal due diligence. NJL offers a brief 'free' due diligence period on internal preliminary, once intake form is submitted back with all requested documentation. Roughly 3-5 business days for proper digestion.
Outside of up-front advisory cost, appraisal cost, lawyer fees, environmental reports & other 3rd party costs may be due before closing. In the event of 'newly found information' during our due diligence period, after the advisory deposit is taken; that hinders our chances for funding to such a level, client accepts responsibility & full ownership for not displaying or properly disclosing to NJL. In certain cases where NJL feels appropriate, NJL may refund up to ~50% of deposit if
It really depends on the specific asset(s) in consideration & the sponsor/guarantor(s). ~1.30x can be a safe rule of thumb for preliminary evaluations when reviewing real estate (broad), or ~20% of annual revenue or accounts receivable. Again, there are no true lines.
Just like all tolerance threshold evaluations, we don't expect every client to have the same financial picture to relevant experience ratio. That's why it's important to understand each scenario is truly its own. It should be blaringly obvious that these three factors are extremely important, with the more the better. But, it really boils down to the financing in consideration.
Risk tolerance is simply the level of risk evaluated relevant to a threshold. Based on all relevant factors & documentation. Every area of capital consideration has its own levels of risk tolerance; and it's important to be aware of the thresholds & factors in consideration.
Arguably, the most difficult to give preliminary terms on. In most cases, we take a smaller or partial refundable deposit for further due diligence. As these ventures require arguably the most time & detail to receive desirable funding options. Factors in primary consideration, are personal liquidity, depth of experience relevant, projections, the overall strength of the project. Likewise, the overall strength of the backers. In relevant cases, we may advise considering other assets owned to hold liability or use as a form of guarantee.
Location, liquidity, depth of experience relevant, total real estate owned, market trends, financial projections, etc. Not in any specific order exactly. At the end of the day, we need to know what's the project, what is the market relevant, & who is/are the person(s) behind it.
The most important factors come down to historic Net Operating Income (NOI) & liquidity. Ideally, ~1.30x (DSCR) to the loan amount in consideration, with roughly 5-10% in liquidity. This should be considered a baseline for risk tolerance. Of course, your credit history, other assets, liabilities & further encompassing documentation play a major role as well.
Every business, client & situation is different. Coming with their own unique challenges, and likewise, solutions. That's why we're here from start to finish. NJL tailors blended solutions with U.S. & global capital partners; geared to give our high functioning clients seeking solutions, a reprieve. Providing the true "one-stop-shop" ease for global ventures & upper-middle market businesses.