Being Investment-Ready
By Paul Wright, MBA, ACC
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Throughout my 25-year career in mission lending, it’s never been easy to inform loan applicants that they were denied. The fact is that over half of the applications I saw were just not “investment-ready.” So, I created an online program that helps capital applicants to better plan, package and pitch to raise the capital they are seeking.
This blog post outlines the top things that lenders are looking for, introduces our Investment Lab program and offers you a free investment readiness checklist.
Lenders will tell you that they are looking for the “5-C’s” of credit: capacity, capital, conditions, character, and collateral. What does this mean? They are evaluating your character which is most often interpreted through your past credit history, your capacity to perform within a set of market conditions,and what collateral assets can you pledge in case your enterprise fails.They also use a series of formulas including a debt-to-equity ratio and a collateral coverage ratio. Each lending organization has their own credit policies and requirements. Be sure you ask what these may be.
Even if you have all the 5 C’s in place, your application may not get to the underwriting process. Here are some of the most common reasons credit applications don’t make it and what you may hear from the capital officer:
- Did not model ability for repayment or a return on investment (“not ready”)
- Did not fit the product/program of the capital provider (“ineligible, misaligned”)
- Did not provide the information needed to underwrite (“incomplete application”).
Most traditional bank officers are trained to screen applications that fit their product offerings and are often overwhelmed with the volume of applications to sort through. Some even use computer algorithms to “pre-qualify” up to a certain amount. If you are a new enterprise or a social enterprise, you may not “fit the box,” and rather than taking the time to tell you what changes or creative options might get your deal funded, you get a rejection letter instead.
I’m sorry if you’ve experienced this. Let’s explore the elements that can help you win over lenders and how my course Investment Lab is designed to help you plan, package and pitch an investment-ready project to various types of investors.
First, you must take a hard look at your business model and discover where you have gaps in past performance and capacity for growth. Using a diagnostic tool, Investment Lab participants identify the gaps and where to focus for improvements. In addition, I’m available to coach you through action steps to fill the gaps or mitigate them.
Unit economic cost and scalability. You may be losing money on each sale without realizing it. In order to grow, you must learn how to calculate your unit economic cost for your product or service, so you know if it’s time to scale or if you need to adjust price points or cost.Knowing these numbers makes a huge impression on potential investors.
Modeling your company’s 3–5 year profitability projections, capital injections and repayment capacity is an imperative part of your plan. Spreadsheets and financial stuff can be intimidating to many, so we break things down step-by-step. We have an easy to use financial modeling tool to help you show prospective investors potential return on their investment.
Communicating the right information to the right person is critical in any fundraising campaign. This is no different with your social enterprise; whether you are raising grant, loan or equity capital. We train you how to identify the right investors and put together the appropriate project prospectus and due diligence documents so that you’re prepared.
Pitching your impact story is important too. You’ll learn a flexible storytelling model that allows you to put emphasis on different aspects of your social enterprise for different audiences. Download tools and templates that will help you create a perfect pitch every time.
So, if you are seeking capital to grow your social enterprise, be sure that you are ready. Download the Wright Venture Services Investment-Ready Checklist and book a call with Paul Wright to review your results and create an action plan.
About the Author
Paul Wright, MBA, ACC
President, Wright Ventures Services, LLC
Paul Wright offers 25 years of experience in community and economic development where he deployed over $30 million of both private and public funds into high-impact/risks projects benefiting BIPOC and distressed communities. He has been a member of the Social Enterprise Alliance since 2014 and served as a Chapter and Affinity Group leader, and content contributor.
Wright’s specialty is helping entrepreneurs be more intentional in creating value for the common good- both margins and mission. His social enterprise expertise is in lean startup practices, marketing strategy, leadership development, and raising capital. He uses a coach approach to help persons to get clear on goals, leverage resources, and take action.
Paul earned an MBA from Eastern College (PA), a BS from Birmingham-Southern College (AL), and is accredited by the International Coaching Federation (ACC). He lives in Berea, KY with his wife and business partner has four young adult children, and enjoys trail running the Pinnacles and long hikes on the Sheltowee Trace.
