Please excuse any typos in this hasty transcript.
Matt Register: Hey Guys, welcome to the show, Texas Business Radio. Texasbusinessradio.com is the Web site. We’re to a section we like to call National Adviser Showcase. There are a lot of really smart guys coming to Texas to talk to groups of CEO’s. We like to bring them in here because they have some very good information we like to share with you guys and right now is no different. I’m your host Matt Register. Jay Curry is in the co-host chair. Jay talk to me.
Jay Curry: Well, I’ve got to agree with you. I love these national showcase because we get a lot of really great talent. Comes in the state to help businesses here in Texas and business owners. And I think we’re going to have a great one here. It’s going to be fun.
Matt Register: Yeah, no doubt. Capital is vital to your business and growing your business takes a lot of capital. We have a gentleman here all the way from Atlanta, Chris Risey with Lantern Capital Advisors. To tell us how you get more capital to grow your business. Chris welcome to the show.
Chris Risey: Thanks for having me Matt.
Matt Register: So tell me about Lantern Capital Advisors.
Chris Risey: Yeah, sure. We’re a consulting practice, financial consulting practice, specializing in working with entrepreneurs owned businesses, really, across the United States. And really specialize in working with entrepreneurs companies that are growing or growing rapidly. And they find themselves challenged by getting enough capital to really grow their business the way that they want to do it. And so we help them get capital to execute their growth plan or potentially make an acquisition or sometimes one partners interested to buy another. And we really help them know what their options are in terms of capital and help them try to understand what their, where they could take it. And also try to understand what’s important to them in terms of capital because there’s lots of aspects to it. Do you want to give a piece of your company away? Do you not? Do you care about personal guarantees? Things that business owners really, are near and dear to their heart. Help them understand some of the different options and then help them go through it to find the capital and the financing structure that’s best for them.
Matt Register: Well there’s a lot of flavors of capital. There are a lot of flavors of debt capital. There’s a lot of flavors of equity capital. Each one has a cost and availability. Right? And you’re there to kind of help them find the most optimum, the optimum mix that they need to be able to finance the needs of their company. Right?
Chris Risey: Yep. So, that’s exactly right. So what happens for a lot of growing companies is they’ll go through a stretch of time where they’re growing their company and they’re with the bank and they kind of max out the capital that they have with their current bank. And they know they need additional capital, They’re not quite sure where that could come from. And so there’s other forms of capital that might be available to them. Different forms of debt capital or equity. In terms of debt, there’s things that non-bank lenders will provide to companies. Things like subordinated debt, mezzanine financing, lots of different types of flavors of capital. And so what we do is help companies understand the different options. But we also take the company, big believer in taking the company, putting together a business plan and then sharing that with a number of different financing sources. Including banks because we can talk about numbers and that’s what drives finance but in reality it still partly an inexact science. And so Ive had clients where maybe their capped out at the current bank, put together what their growth plan is, share that with a variety of other non-banks, as well as banks. And lo and behold there’s another bank that’s just like the one that they’re with now, that steps up and says “Hey, we can give you an additional million and a half” or whatever it is that you’re looking for and do it with rates and terms that are comparable to where they have now. So it’s very much a process of commit to play in the numbers, seeing what the different options are. That’s the way to really drive the process, so you can get the most out of it. And that’s, we take that off their hands because as you know, a lot of businesses that are growing rapidly, there’s, there’s not enough hours in the day to be able to do all the things, just in your core business and to look at all those options. It helps a lot to have someone that knows what they’re doing and can drive that process.
Matt Register: Well these CEOs are good at whatever it is they do. They’re not necessarily good at raising capital. Right? That’s a completely different skill set and something that they should probably hire out. You know, this is, this is interesting. I mean this, we work with a lot of businesses that need capital and this, it’s risk, reward. The riskier of the layer, you know, flavor of capital that you have, the more that costs. And finding that right mix, you have to be able to tell the story of how this company is going to make money in words and numbers. Right? You have to be able to tell that story.
Chris Risey: Yeah. The core of it is really to have both. Is to be able to have, most companies have an interesting story in, especially ones that are in growth mode. There’s a lot there to tell. But then for bankers and people that want to provide the capital they got to have the numbers that go with that. And we really try to mirror the two together and help them see what their options are. And on top of that, help them, for the business owner, once they have an idea of the different things that are available to them. Most companies, most of my clients, once they go through the process, they’ve got multiple options. The question then becomes, what are they most at peace with. So some owners are very debt adverse. So they like “I want additional capital but I don’t really like that. So could we do equity?” At some companies where they’re like “Hey, I don’t want to give 1 percent of my company away. So what could I get, you know, if we do it on a debt basis?” And the same thing with guarantees, personal guarantees.
Matt Register: Sure. Sure.
Jay Curry: This used to be kind of, pretty simple, in the old days. You went to the bank, you got your money. Right? Now days, it’s very complicated. It’s changing. You need to have somebody that understands all the alternatives and who stays up with things as they are changing. It’s really a necessity to have knowledge because CEOs can’t sit around and read all the books and keep up with everything they need to. They need the experts that can come in and help.
Chris Risey: Yeah, you’re right. The market really is changing a lot. It used to be that you go to the usual suspects that were in your local market. But so many investors and lenders, they can do business all over the country.
Matt Register: Sure.
Chris Risey: And you really can have competitive groups, that are all the way, you know, on a different coast. That can provide capital to you at better terms then maybe somebody that’s, you know, right next to you. And your point Jay, about the, you know, trying to have some expertise and do that kind of thing. I remember I did a financing where I helped a management team buyout a company’s owner. And do it in a way that the ownership stayed just between the manager and the owner and we got it done. It was a large financing, was about $20 million. And I remember that when we were all done the CFO pulled me aside and said “You know” he goes “I’ve got a book that’s about four inches thick about buyouts.” He goes “All the stuff we did, none of that was in that 300 page book that I bought.
Jay Curry: Exactly.
Chris Risey: You know, so that’s not really how they were doing it in the real world.
Jay Curry: Well it changes all the time, people like you stay up with that. That’s the only way it can be done.
Chris Risey: Yeah. And it’s really, the only way to do it is just to be in it all the time.
Jay Curry: All the time.
Chris Risey: Because it’s, something pops up, a new financing you’re working on and some new group shows up and, you know, you add that to it.
Matt Register: So give me an example of a typical client of yours. At what point does that business owner realize that he needs additional capital?
Chris Risey: Usually they don’t, it’s usually not that hard for them to know. They’re kind of feeling the pain. Many of them are in growth mode. Some of them actually, have maybe, came out of a point where they were losing money for a period of time and now they’re starting to grow again. But because they’re just now starting to grow again, when you look at historically, the banks are not that excited to give them additional capital. And so they can see this shortfall coming and they can see their pipeline building and they’re like “Gee, I really need additional capital”. So that’s one example. Another one would be, you know, a company is going along and they’re doing great. And all of a sudden an acquisition opportunity pops up and they know that their current bank isn’t going to give them enough capital to be able to swallow that acquisition. And so, you know, my business is really driven by an event. All of a sudden they need capital and they’re looking for a resource to help them kind of go through that process. And the part that’s unique about what I do is that when we help them through that process, it’s a little bit different business model. It’s not a investment banking, commission driven kind of model. Which is fine, especially if you’re selling a company. But a lot of times when you’re raising capital there can be conflicts between the type of capital, the amounts. It can be very expensive. So our process is purely, hourly consulting basis and there’s a very specific methodology that we use. It’s kind of a two step process. And, but to not get into the details of that but the takeaway is it’s a lot less expensive, number one. And number two, knock on, I don’t know if that’s real wood or not. But…
Matt Register: No.
Chris Risey: We’ve delivered financing. The process, I developed it in 2009. A specific way of going to market. It’s kind of a two step process. And I developed that in 2009 and since then, we’ve delivered financing for all of our clients. When the credit markets got upside down, you could have a great company.
Matt Register: Sure.
Chris Risey: And not know if you could get it done. So I was, I wasn’t so confident. So I said to myself “Let’s just do a little bit of front end strategy work first. Test the market a little bit. I’ll share the feedback and if it’s positive, let’s go to market”. And I’ve been using that way ever since and delivered for all my clients. So we are happy with that.
Matt Register: Oh, it’s very, very interesting. We’re talking to Chris Risey with Lantern Capital Advisors out of Atlanta, Georgia. Chris thank you very much for joining us.
Chris Risey: Thank you Matt.
Jay Curry: Very informative.
Matt Register: What is the easiest way for somebody to learn more, somebody to get in touch with you?
Chris Risey: Easiest way, you can call the office. But probably the easiest way is just go to our Web site, which is Lanternadvisers.com and we’ve got a lot of white papers, a lot of content. We believe in sharing a lot of information to help entrepreneurs and, you know, feel free to reach out anytime.
Matt Register: Lanternadvisers.com. Chris thanks for joining us. We’ve got to go to a break. That will be linked right there from Texasbusinessradio.com. So if you’re driving and don’t want to take notes. We’re going to links every guest. We do have to go pay some bills ourselves. We’ll be back right after this. Don’t go anywhere.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.