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Your investment banking questions answered here

By Bob Hodgson

Question: My attorney is suggesting I put my business in a Trust. I thought I understood what he explained when I was in his office. Later on that evening, my wife asked about a Trust and I could not explain it.

Answer: A will goes into effect after you die. A trust takes effect as soon as you create it.

Bob Hodgson

Question: I will be seeking funding for a large capital investment. It has been suggested that I use my accounts receivable inventory as collateral. How does this work?

Answer: Your funding institution will require you to have your customers send a check to a lock box. The institution will collect the checks and disperse the funds.

Question: I am considering a strategic acquisition. My local bank seems to be limited in what they can provide. Do you have any suggestions?

Answer: An investment bank is able to provide funding options and are more flexible than local banks can provide such as:

1. Locate minority or majority equity investors.

2. Collateralize your cash flow, equipment and machinery, inventory, accounts receivables.

3. Able to finance large real estate transactions.

4. Can accommodate senior loans, subordinated loans and mezzanine loans.

Question: I have owned and operated my business for 35 years. I am concerned that a new owner will be lacking experience in keeping this business alive.

Answer: This is a valid concern. Identify your key employees and give them a chance to grow. Allow them to experiment with their solutions and develop experience. Allow your key employees to build competence and confidence. Cut back your hours and get away from your business. You need to demonstrate that your business will run without you. Your buyer prospects will be keenly concerned that your key employees will not leave.

Question: I am considering a large capital investment in my business. This investment will allow me to consolidate operations under one roof rather than three. I am also 70 years of age and realize that it may be time to sell the business. Since I will probably be selling the business, should I proceed with a large capital investment?

Answer: Your focus should be maintaining a high profit margin. Therefore, you should refrain from capital investments for at least two years prior to selling your business.

Amvest Financial Group is a leading international investment banking firm based in Kansas City representing clients with sales from $10 million to over $6 billion.

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