He knew us and our needs. You want to be loved before you're Miss America. The bottom line is, we will probably continue to do 95 percent of our banking outside of San Diego . . . Although not cast in stone, there are some solid givens in lending to the nascent high-tech entrepreneur. Once a start-up can get the attention of and money from a venture capitalist, then creative things can be done by layering the debt and equity positions, and perhaps throwing in some warrants.
Bankers tend to look very closely at the source of an entrepreneur's start-up money.
Personal guarantees are a sign of commitment, bankers agree, and corporate partnerships add a patina of legitimacy as well. A wild card in this mix is the issuance of warrants, which are rights to purchase stock at a predetermined price, usually for a predetermined time. Technically, warrants are not collateral, because there is no value to them until and unless the start-up company succeeds. But they are considered enhancements to loan rate and structure, explains one tech backer. They give the bank yield potential . . .