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Useful Advices - Positioning Your Company for Debt Financing
Positioning Your Company for Debt Financing:
There was a time in the old days when going to the bank was the only way to get outside capital for your business. These days with the explosion of raising equity investment, many of the guidelines for running a company have been revolutionized. Unfortunately this new phenomenon is only true for companies wit
There was a time in the old days when going to the bank was the only way to get outside capital for your business. These days with the explosion of raising equity investment, many of the guidelines for running a company have been revolutionized. Unfortunately this new phenomenon is only true for companies wit
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
h super "star power", because these companies have potential to create sky-rocket return earnings.
For everyone else, sticking to fundamentals is where it's at. Building your company incrementally, following a pre-prepared business plan, watching expenses, and increasing sales. When your company moves beyond its launch, it begins to operate much like a
For everyone else, sticking to fundamentals is where it's at. Building your company incrementally, following a pre-prepared business plan, watching expenses, and increasing sales. When your company moves beyond its launch, it begins to operate much like a
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
bank. On the financial side you will be making credit decisions
involving your customers. Some will have to pay C.O.D., some you will extend net 30 day terms. In this sense you are now becoming a banker for your customers.
Without getting into how inexpensive debt financing ultimately is compared to equity (try 20% annualized interest versus 20% owners
Without getting into how inexpensive debt financing ultimately is compared to equity (try 20% annualized interest versus 20% owners
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
hip lock stock and barrel), in certain situations the time honored tradition of borrowing money can be the best solution for increasing growth or starting a company.
By knowing what commercial finance companies look for, you will become a much more attractive prospect.
1. Concentration - This means putting all your eggs in one basket. Avoid going out a
By knowing what commercial finance companies look for, you will become a much more attractive prospect.
1. Concentration - This means putting all your eggs in one basket. Avoid going out a
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
nd making a large sale to a customer and then not continuing your sales effort to find more customers. The risk of a problem developing with your main customer, or for whatever reason they are no longer buying from you can obviously be detrimental to your success. Finance companies look for incoming revenue to be spread evenly over a number of customers.
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
2. Creditworthiness - Who are you lending your hard earned assets to? What kind of due diligence do you perform on new customers? The challenge here is whether to accept a lucrative sale with a company that could never get credit from any type of finance company. You are essentially telling yourself that you know better than the banker about loaning mo
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
ney. Finance companies will respect a business owner that has a thorough credit checking process and a number of stable credit worthy customers.
3. Book keeping - While some businesses send out all their accounting to outside agencies, it is helpful to have a qualified book keeper on staff. When it comes time to seek financing, being able to produce an
3. Book keeping - While some businesses send out all their accounting to outside agencies, it is helpful to have a qualified book keeper on staff. When it comes time to seek financing, being able to produce an
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
nstant fiscal snapshot of your company will show the sophistication of your operation. Finance companies appreciate businesses that keep a close eye on their books.
4. Taxes - Pay them. Using the Internal Revenue Service as your funder becomes expensive. Whenever you work with a finance company, you will be pledging assets as collateral, thus the nature
4. Taxes - Pay them. Using the Internal Revenue Service as your funder becomes expensive. Whenever you work with a finance company, you will be pledging assets as collateral, thus the nature
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
of debt financing. When you fail to make tax payments, the government steps in and places a lien against those same assets essentially stepping into first position. This leaves the finance company with money outstanding to your business and no collateral to back it up. This places your entire relationship in default. When going to closing on financing e
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
xpect to sign a form that allows the finance company to receive duplicate correspondence from the IRS. This is standard procedure to track tax problems. Owing taxes does not mean you cannot get financing. It is entirely possible to receive a subordinated debt agreement from the IRS which allows the finance company to work with you unencumbered.
5. Bankr
5. Bankr
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
uptcy - If you have ever entered into a bankruptcy proceeding whether personal or business, own up to it right away. It will come out, and being up front about the circumstances will enhance the necessity to overlook the past difficulties.
6. Applications - Finance companies ask for a variety of information when performing their due diligence. Do not be
6. Applications - Finance companies ask for a variety of information when performing their due diligence. Do not be
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
alarmed, they are not trying to steal your secrets. They need to feel comfortable with you and your company. Each company has its own threshold for fact checking. Invariably the finance companies that do the most thorough job are the most reliable and safest to do business with. Finance companies like working with a business that takes the time to put a
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
loan package together in advance of asking for financing. Typically you can start with; Interim Balance & Income Statement, Interim Profit & Loss Statement, Last Year End Statements, Accounts Payables Aging Report, Accounts Receivables Aging Report, and of course Tax Returns.
7. Contracts - Be prepared for onerous language. Finance companies cannot sug
7. Contracts - Be prepared for onerous language. Finance companies cannot sug
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
ar coat the reality that if something goes wrong they need to exercise their rights. They have to go into the relationship always thinking that the absolute worst case scenario will unfold. Once a finance company finds itself being defrauded, stolen from or payments not made without explanation, it's too late to insert stronger language for protection. B
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
and large the language is standardized and walking from a deal to start shopping for less demanding legalisms won't produce much. Remember this, a contract is just paper in a file cabinet until you default on your agreement. Stay within what you agreed upon and all the tough language won't matter. Even if you start having financial difficulties, get in
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
touch with your finance company immediately. You can greatly reduce the chance of default by showing that you are pro-active with your situation.
8. Using the money for the right reasons - This sounds obvious but in certain cases it can be highly relevant. You hear a lot about going to the right Venture Capital Firm that would handle your type of invest
8. Using the money for the right reasons - This sounds obvious but in certain cases it can be highly relevant. You hear a lot about going to the right Venture Capital Firm that would handle your type of invest
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ment. In some ways that holds true for debt finance companies. They tend to work within industries that they feel comfortable. Additionally the type of financing company will depend on your plans for the money. If you are trying to set up a new business infrastructure, then a working capital line of credit is not your best option. You will probably do be
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
tter with a term style loan that will allow you to amortize the expense over a period of years.
9. Management Integrity - Also like equity investment, get a good team together and hold onto them. Finance companies raise red flags when a long time Financial Officer who has been the contact person at the company since the inception of the relationship all
9. Management Integrity - Also like equity investment, get a good team together and hold onto them. Finance companies raise red flags when a long time Financial Officer who has been the contact person at the company since the inception of the relationship all
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
of a sudden leaves without explanation. Again, always fearing the worst, the finance company could unjustly feel that something untoward was afoot and begin to scrutinize your account more closely. Even though finance companies are not part owners of your business, they are partners in your success just like your good customers. Keep them abreast of bre
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
aking news.
10. Be Professional - Answer calls and messages expeditiously, be prepared with information, show up on time. When its crunch time and you need an extra fifty thousand dollars for a week to get a better deal from a vendor, you would be surprised how much mileage you can get by being a courteous and thoughtful customer to your finance company
10. Be Professional - Answer calls and messages expeditiously, be prepared with information, show up on time. When its crunch time and you need an extra fifty thousand dollars for a week to get a better deal from a vendor, you would be surprised how much mileage you can get by being a courteous and thoughtful customer to your finance company
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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