Home » Financing
Category Archives: Financing
How Did Tycoon Meshulam Riklis Make His Fortune?
Money is to look at, not to use. – Meshulam Riklis
One of the questions that I get asked on a regular basis is about the possibility of following the tycoon growth strategy without employing debt. The answer is that it is possible to do so. Over the years I have participated on the buy-side in a number of deals with debt averse buyers. One Russian transportation company comes to mind. The management team had basically been given the company for free by the Russian government shortly after the collapse of the USSR in 1991. The managers then threw themselves fully into growing the company internationally, including in the USA. However, their steadfast rule remained “no debt.” Every acquisition had to be financed with internally generated cash.
The downside to avoiding debt is that it will take longer to get started and, thereafter, growth will be slower. However, some people just prefer to avoid the use of debt. In thePlaybook we focus on those who utilize well-managed debt to grow because it’s easier to start that way and the growth rate is far higher. If you are starting out without a large war chest, it’s imperative to be creative about financing. If you wait for the heavens to drop your grubstake into your lap, you will be waiting forever. The lesson is start small and fast, then build momentum.
Tycoons are masters at the creative financing needed to get rolling. Once you learn the basics of deal-making from them and have achieved a critical mass almost any deal becomes do-able. The challenge is to get started today with what you have. Tycoons have a great deal to teach us about getting off our duffs and starting one step at a time. Let’s take a look at what I mean by this.
One of the financial tools used by tycoons is leverage. This simply means that they will use as much debt as possible to put the financing together for a deal. In many cases, for every dollar of equity they invest there are four to nine times as many dollars of debt. We could spend a great deal of time going over how this is done but today I want to leap-frog the topic to someone who took leverage to an extreme.
I refer to Meshulam Riklis who described his financing strategy as “the effective nonuse of cash.” He summed up his financing philosophy as “Money is to look at, not to use.” Recall the old joke about bankers: they will only lend you money when you can show that you don’t need it and slam the door in your face when you do need it. The joke captures the catch-22 faced by borrowers. Riklis came up with a beautiful solution to the problem which he described in the following words:
Mergers may serve several purposes, but they usually have one single aim at the start. That aim is to create a better and more rounded operation that can lead to more profitable results.
After the first acquisition of Rapid Electrotype, the determining factor in the success of all subsequent deals, has been effective use, or nonuse, of cash.
The point of cash can best be illustrated by asking the question: If you knew I was in a position to pay for the article I wished to buy would you give me credit? Of course, the answer is bound to be “yes” and vice-versa, if one did not have the cash to pay for the merchandise he wished to buy, he would certainly be required to pay cash.
So Riklis began hoarding his cash and flashing it in front of lenders whenever he was raising financing for a new acquisition. The sight of the cash served to assuage their anxiety about lending to Riklis and helped him to keep his equity stake to a minimum.
CNBC Squawk Box: Sen. Warren Leads Charge to Break Up Big Banks
Senator John McCain and Elizabeth Warren are teaming up to break up the megabanks. Massachusetts Senator Elizabeth Warren joined the Squawk Box team on Friday, July 12th to discuss this new bill.
Financing your Family Business without Going Broke
Financing is indispensable for the success and growth of your family business. But after you’ve already tapped out your personal funds, and perhaps those of friends or other family members to get your business up and going, you’re going to have to find a way to keep the lights on without going broke.
That means you’re going to have to borrow money or obtain credit from a variety of institutional lenders. Business loans and lines of credit will allow you to cover expenses, buy new equipment, manage cash flow, purchase inventory, create new products or services, or expand your business when the circumstances are right.
If your business is new and doesn’t have an established credit history, you may need to provide collateral to secure a loan or credit line. This could be any personal assets that you cannot otherwise monetize or afford to spend on the business, but can be utilized as security. Your best bet would be to approach a local bank or credit union where you have a personal relationship and a history of sound money management.
If your business does have a positive credit history for at least a year or two, the commercial bank that issued your business credit card is a good place to go to apply for a line of credit. Make sure that you’ve paid the balance on that card promptly each month, and if necessary, let the bank know that you’ve been shopping around and intend to move any accounts to the lender that can provide credit with the best terms. Most banks will want to keep you as a customer.
Regardless of the age or reputation of your family business, or where you go for financing, you’re going to have to prove to every lender that it is a financially solid concern, with the capability of long-term survival. So make sure you have all your paperwork in order, including all financial and tax statements, all profit and loss history, as well as a list of contacts for credit references.
You’ll also need to provide a pro forma to each potential lender. This will be a description of how you intend to utilize your loan or line of credit, how it will affect your cash flow, and how you anticipate paying back the money you’re going to borrow.
Once you’ve secured funding, make sure you stick religiously to a repayment schedule. As you continue to display credit worthiness, you will be able to increase your credit limit, borrow at more favorable rates, and most important, keep the business going without going broke.
Al Krulick is an award-winning journalist with dozens of years of writing experience. He writes and blogs for Debt.org.
Shark Tank: Meet the Sharks at Babson
ABC Television Shark Tank Hosts/Entrepreneurs Daymond John & Mark Cuban visited Babson College Tuesday, November 29th.
The entrepreneurs held a Meet The Sharks event with Babson student businesses True Intentions and Spy Games as well as participated in a Q&A with the student audience.
Daymond John is the Entrepreneur-in-Residence at Babson College 2011-2012. Daymond’s creative vision helped revolutionize the sportswear industry in the 1990s. As founder, president and chief executive officer of FUBU—”For Us, By Us”—Daymond created distinctive and fashionable sportswear and a host of other related gear. FUBU’s phenomenal success made mainstream apparel companies realize the potential for fashionable sportswear that appeals not just to trendsetting urban youth, but to mainstream teens as well.
Mark Cuban is the highly successful entrepreneur and investor who founded HDNet, Broadcast.com and MicroSolutions. He has also been an investor in startups, including Mahalo, JungleCents.com, motionloft.com, Filesanywhere.com, Naked Pizza and 140Fire.com. Mark may be best known for his purchase of the Dallas Mavericks on January 4, 2000. Under his leadership, the team’s home games have become a total entertainment experience. Despite initial criticism, he added much more to the usual game-day experience by introducing original video content, advanced technology and unique entertainment options like the Mavericks ManiAACs. His successful efforts have brought a sense of pride and passion to the fans.
Human ATMs- – Business
Human ATMs- – Business
Apple has patented a technology that can link up people who want to borrow money with people willing to lend it, but critics say the process could be fraught with peril.
To contract new debts is not the way to pay old ones – George Washington
Saygin Yalcin – Financing – Raising Money
Saygin Yalcin is the Founder and President of the first and largest online private shopping club in the Middle East, Sukar.com, Vice President at Souq.com and Partner at Jabbar Internet Group. Moreover, Saygin is Academic Lecturer of Entrepreneurship and Ecommerce at the Canadian University of Dubai, one of the leading universities, research and teaching institutions in the UAE.
Saygin has founded Sukar.com and in less than a year, the company has become the most successful e-commerce startup in the Middle East and, with Saygin at its helm, has grown into a multi-million-dollar business.
More than 1 million shoppers have invitation-only access to fashion, lifestyle and luxury products through daily offers at privileged prices. The club operates across nine countries, including the GCC, Jordan, Lebanon and Egypt.
Souq.com, the largest online retailer in the Arab world has acquired Sukar.com in April 2012. With the investment of Tiger Global, Naspers (MIH) and Jabbar Internet Group in October 2012, the new Souq Group has been formed.
Prior to founding Sukar.com and collecting experience at multinational corporations, such as L’Oreal, the BMW Group or Capgemini Consulting, Saygin was Founder & CEO of Joe Suis GmbH; a premium luxury house for high end leather handbags and diamond jewelry, collaborating with online shopping clubs as major distribution channels.
Joe Suis has successfully been acquired by KupiVIP.ru to become one of the most successful private labels in Russia.
Saygin holds an international master’s degree in business administration and economics, having studied at top business schools in Germany (WHU), the USA (USC) and Mexico (ITAM). He is fluent in German, English, Spanish and Turkish.