The Bank of Ann Arbor provides financing for early stage companies and has products for the equity financing community. In this segment, Michael Cole provides an overview of bank financing for companies. In making loans, one of the bank's paramount concerns is securing loan repayment.
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Michael Cole, VP of the Technology Innovation Group at Bank of Ann Arbor provides our first overview of bank financing in our series on Financing Innovation. In considering banks, it is important to remember that each one is unique. They specialize in different types of business and therefore are more likely to make loans to some businesses than others. That said, bank financing is a more risk averse form of financing, focusing on assuring adequate collateral to cover a loan in case of default. Highlights include:
- Bank of Ann Arbor provides loans to early stage companies and also has products for equity financing targeted and angel investors and venture capitalists.
- Bank of Ann Arbor finances working capital at the rate of 80% of a company's receivables. In case of default, a receivable is much harder to recover than an asset like a building or a piece of machinery.
- In all loans, the bank's primary concern is how it will be repaid. It looks first to the strength of the cash flows and the business. Next it looks to assets that the company holds. Finally it looks to the assets of the business owner.