What you need to get Commercial Financing

Category: Commercial
Current Grade: A+
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Posted on: 08/09/2008
Posted by: San Mateo Living
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Getting Commercial Financing isn't the same as getting a mortgage to buy a residential property. Because commercial property is evaluated differently from residential, financiers have different source document requirements. The two BIG ONES in commercial finance are the Executive Summary and the Personal Resume.

These two documents will tell a financier if a deal makes sense and whether it's solid enough to convince a lender to fund your property. These two documents are THE MINIMUM information required. When new commercial investors are told they need to produce an executive summary, they are often at a loss when trying to figure out how to create one... so I'm providing the following general format to get you started.

Please use this as a guide to begin your executive summary. If you'd like to apply for commercial financing through me, you may do so by sending your executive summary and resume to me at DavidGowans@gmail.com .

Summary:

The following summary highlights the business plan of PTA Travel. For additional information, please see the more detailed sections of this summary. Upon written request we’ll provide a copy of our 66 page business plan with complete details, color pictures and 5 year financial projections.

Background:

The company is a 3 year old existing travel agency with agents around the country booking discount packages online for domestic and international travel. Our current gross sales are in the six figure range.

The Company:

John Doe, founder and CEO has 100 years experience in the travel industry. He has served on other boards and has been involved in raising capital for other companies. John Blow COO offers 22 years of licensed CPA financial and management experience. He’s the founder of specialty pest control stores in Louisiana, which he has successfully turned into a franchise opportunity. Jack Row VP of Marketing has a degree in Business Administration and Marketing with over a decade of experience in the field. Jack has already made presentations of the product described in this plan to the Board of Directors of major New York advertising agencies.

The Opportunity:

Briefly state the strategic opportunities the Company currently enjoys and how you intend to capitalize on them to your advantage

Company Objective:

The company has determined that combining travel with major advertisers looking for cost-effective ways to reach a target market creates a win/win situation. Using our business plan the company will build a huge database of people who will book travel online from our website where we will also feature our Kiosk advertisers giving them even more bang for the buck. Using the expansion capital raised from this business plan we’ll have built, equipped, placed and networked 100 Kiosk in the first year. The goal is to create a whole new distribution channel for the travel business and our advertisers.

The Product:

The convenience of booking travel packages online, saving money on airline tickets, creating business opportunities for our network of travel agents is the product of the company. Additionally as a by-product we offer high tech, high touch services to our advertisers. The Kiosk will offer plasma videos on the corner towers that’ll be programmed with the anchor ads for national advertisers. These can be changed and displayed much like a TV ad at the choice of the advertiser so they can promote events or products.

With scrolling banners on all 4 sides of the Kiosk displaying “Register for a FREE Cruise Vacation” people will walk up and leave their personal information so the company can continue marketing to them using e-mail and snail mail. After registering they’ll have sample products of our advertisers in hand because our trained personnel will have promoted it to them. This provides a unique targeted service to national advertisers who spend literally millions of dollars each year using a shot gun approach with TV, radio, billboard and magazine advertising and not handing out any samples. According to Terry Reiser of TAG Creative, this form of Kiosk advertising will reduce the cost from $53.60 CPM in newspapers to $1.64 CPM at the Kiosk level and help create better impressions for advertisers.

The Competition:

At this time the company has not seen the Kiosk concept used for the combination of both travel and national advertising. Having spent over $600,000 in R&D and well over 2 years developing a website with the back office to handle such volume of travel leads and channels for national advertisers, the company is confident that at this time there is no competition.

The Marketing Strategy:

Currently the company has identified 100 malls for the Kiosk. We have researched and discussed with major property managers of the malls how the lease arrangements will work. Once we are funded, we have the blue prints to build the Kiosk, the agreements in place for the hardware and can be in the malls open for business within 90 days of funding.

At the request of TAG Creative we’ll install a working Kiosk in the lobby so they can feature this new form of media to their national clients who have all expressed interest in the Kiosk concept. Furthermore, the company has in writing a commitment from Donna Douglas of the TV show “Two Lane Traveler” to allow PTA Travel to be the sponsor of her TV show aired in 80 million homes each week. On the show, the company will promote traffic to the Kiosk in the local malls and the companies website where our national advertisers will be featured as well. Cross marketing this way will increase traffic to the Kiosk and our website to register for our FREE Cruise Vacations.

The Pricing Strategy:

The company has determined that national advertisers will pay a minimum of $3,000 per month for space advertising in our Kiosk. Our model Kiosk has 24 back lighted duratran signs and 30 screens for digital video advertising. Using this formula the projected gross revenue from advertisers would be a maximum of $162,000 a month.

So as to stay on the conservative side our business plan projects 48% utilization or 26 spots being sold per Kiosk. The cost to the advertisers is minimal and they all contract for a 1 year period. Many national advertisers want space on all 100 Kiosk. Comparing this pricing to all other forms of advertising the company is confident that we’re in line with our pricing and very reasonable.

Financing Requirements:

The company is looking for $4,000,000 (four million) in debt financing. We’re looking to borrow the funds with single digit simple interest financing amortized over 15 years and with a 3-year balloon. Payments will begin 12 months after the funding date with 12 months of principal and interest payments set-aside in escrow on the day of funding.

To secure the investor(s) we’ll use the Kiosk and hardware as collateral. Additionally we’ll secure the investor(s) with the contracts that are signed by the national ad agencies up to $6,000,000 face value.

Also, we’ll give the investor(s) 10,000,000 shares of equity in the company. As of May 2003 the par value of our common stock is $1.90 per share.

Financial and Non-financial goals:

The company has projected the financials as follows:

Year 1 Year 2 Year 3 Year 4

Mall locations 100 200 300 400

Gross Income $24,148,500 $64,642,500 $96,963,750 $129,285,000

Kiosks Expenses $12,862,500 $33,450,000 $50,175,000 $66,900,000

OperatingIncome $11,286,000 $31,192,500 $46,788,750 $62,385,000

Corporate Expenses $4,074,711 $6,162,271 $9,243,407 $12,324,542

Income B4 Taxes $7,211,289 $25,030,229 $37,545,344 $50,060,458

These figures reflect only selling 48% of the advertising space on the Kiosk. The maximum staffing we project by the end of year 4 is 85 employees.

The share holders will realize dividends and appreciation in their equity as we roll out the business plan. The return on investment for our share holders is projected to be 20% a year minimum.

Exit Provisions:

Preference on cash distributions

Sale by principal with limitations

Transferability provisions

Adjustments and stock splits/dividends

Assignment provisions

Mandatory and voluntary redemption

Liquidation preferences

Demand registration rights

David Gowans

DavidGowans@gmail.com

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