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Merits of Asset-based Funding over Equity Capital: Part 3.

(EMAILWIRE.COM, March 02, 2007 ) Las Vegas, NV -- As documented by BOTH the Larta Institute and National Venture Capital Association (NVCA); venture capital and private equity, over the course of the last 4 years, continue to be on the decline (as of 11/04). The overwhelming majority that is issued (estimated $51B between 1-5/05) has priority to expansionary (3 years) stage companies (usually with revenues over $5M); NOT companies with no revenues track record or any form of collateral. As of 1/05; Barry Moltz published an article on the "Six Biggest Entreprenurial Mistakes" in www.youngmoney.com. First on the list was "Depending on building a business though funding from an angel or VC". He further stated that the chances of success doing so range from 0.5 to 4%. Barry Moltz is the co-founder of the angel investor group www.praireangels.org. Only 5% of the US population qualifies as 'accredited private investors'. Of this percentage, the majority of these investors have 3 industry focus sectors of ; real estate, technology, & energy. Buying 'accredited investor' cold-calling lists and the related cost of operating call centers, has even a less success average of 1 to 2%. Of the business plans competing for investors interest; only 5% are actually read. The investment community rates 84% of business plans as average or poor. And angel investors reject 97% of plans. All of the above are some of the reasons why only 1 in 200 funding proposal submissions to P/E or V/C investors result in approval. Kind of like "throwing mud against the wall", in hopes that it sticks. PO Funding is not debt financing; it is asset-based funding. Once a company is approved for PO or simular funding; it is better than equity capital, since you do not have to pay it back. Also, approval is not based on your firms credit rating; but rather, that of the signatory firm on the purchase order or distribution agreement. 'Balance Sheet Collateral Enhancement' financing is also an attractive alternative for early-stage companies. Also be reminded that the V/C or P/E acquisition prorated costs are between 25% to 70% of earnings OR a average range of 3x to 10x of their investment principal after a term of 5 years. And V/C or P/E almost always seek hands-on management (majority) control in addition to high ROI. (You might as well be an employee). In the Spring of 2005; 7-year old Las Vegas-based employee-surveillance company 'Smart Connect', had a private investor require a return of 30x his investment of only $100,000. Equity V/C's also get preferred stock with a deferred dividend or 'guaranteed return' (of at least 3x ROI) should the company be sold. Also, the preferred stock can be 'participating'; which means it is ALSO entitled to a percentage of remaining proceeds based on ownership. Proceeds are based on valuations. And valuations on a company if it goes public are much higher. Example: A deferred AND participating equity investment of $3M to a company; that later goes public and then sold for $100M, could owe the investor $39M. Now which is cheaper? Then there is the due diligence timeline issue. For equity investments, the average range is 2-6 months for approval and close of escrow. For asset-based funding, a LOI can be issued in 72 hours and close of escrow achieved in about 2 weeks. Then there are those who equate equity capital as being expendable risk capital. For those who think they don't owe investors any money should the business negligently or fraudulently fail...need to read the provisions outlined in the US Sarbanes-Oxley act of 2002. On the flip side, companies can attract investors by acquiring FDIC-insured insurance guarantees; designed to protect the investors principal in the event the companies fail for whatever reason. (This is of particular benefit to film investors) Access to angel tech investors, government interest-free debt capital, corporate sponsorships, institutional equity, asset-based capital, foundation grants, export working capital, financial instruments, and technology transfer partnerships are some of my finance options providing a consistant approval range of 30% to 75%. Global Crossroads Capital investor approval criteria report is now found on www.del.icio.us and retitled as "Financing Tips" on the Partners link of www.evancarmichael.com.NEXT: Part 4...Fee Terms ContactJeffrey D. AllenC.E.O. Global Crossroads Capitalinvestorrelations@financier.com Tel: (702) 369-2621 9am-5pm PSTwww.GlobalCrossroadsCapital.com ###This press release was issued through GroupWeb EmailWire.Com. For more information on press release distribution, go to http://www.emailwire.com.



Joseph Nchor

investorrelations@financier.com

Source: EmailWire.com


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