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StreetSmarts

Portfolio valuation
Think before you take the money View the transaction from an investor's lens. How would

Before pursuing working capital, pause and pressure- someone who doesn't know you or your merchants
test your strategy. evaluate your book of business? What would they value
most? Most investors evaluate portfolios by SIC codes, risk
• Start by defining your objective. Is it growth, levels and average age of account.
acquisition, equipment rollout or agent expan-
sion? What's worth more to an investor: a bunch of merchants
using countertop terminals or agnostic POS systems or
• Run realistic cash-flow projections and stress- merchants using proprietary software that cannot be
test repayment timelines. poached by another ISO or service provider?
• Know your portfolio metrics: SIC mix, attrition What would an investor value more: merchants using
rates, average merchant tenure and residual generic, easily reprogrammable software or merchants
stability. using solutions that are owned by the ISO?

• Consider how funding affects control, owner-
ship and long-term flexibility. Are you solving Buyers also care about you and your ISO's reputation. They
a temporary gap or building scalable infra- may ask why you're selling and what you plan to do with
structure? the money. Prepare your answers, exude confidence, and
know your numbers and valuation. Don't be a serial pump
• Finally, prepare your narrative. Why now? Why and dumper; investors avoid people who repeatedly build
this funding method? and sell small portfolios.
Have a plan for the money
A disciplined plan signals maturity and can mean
better terms and fewer surprises. Most importantly, before you go out for working capital,
have a plan for the money. Will you buy equipment, buy
out agents, buy a company, buy residuals from another
lines of credit to companies that own some type of company, buy an office building or new equipment, or
technology. fund a new salaried salesforce?
• Pro: These are reputable funding sources with
low risk of fraud or foul play. Let's say you take a loan and give away 100 POS stations.
• Con: These loans are harder to get; some require You buy equipment in bulk for a deep discount, then offer
a personal guarantee or real estate or other assets merchants "zero percent" with dual pricing. You move
as collateral. Most don't view your residuals as those units quickly, rinse and repeat, and get your money
an asset and are more interested in investing in back within three to six months.
technology that you own or are building. They
may also require monthly data, depending on You may want to buy someone's book of business. Due
how the loan is structured. diligence and negotiation may take more time but could
be worth the guaranteed cash flow.
• Alternative lender: Alternative lenders are non-
bank financial institutions that provide loans It pays to remember that whenever you take money, you
outside the traditional banking system. There are have a new boss. Whenever and however you raise capital,
multiple models to choose from; crowdfunding is a know how you'll use the money. Having a clear plan and
good option for product and service financing. For solid repayment roadmap will improve your odds of
example, you could use crowdsourced funds to build success and reduce your risk of falling into a repeated
software and give free licenses to investors. borrowing cycle.
• Pro: You'll know where you stand with alternative Stay informed
lenders; their approvals and declines are among
the fastest in the business. Many use AI and Want to know more? Keep reading The Green Sheet and
advanced technology to offer funds on-demand, consider following me on LinkedIn, where we can share
around-the-clock. ideas and support each other.
• Con: It is not easy to get money from alternative
lenders because they don't usually view residuals Allen Kopelman, a serial entrepreneur, is co-founder and CEO of
as collateral. Nationwide Payment Systems Inc. and host of B2B Vault: The Biz
to Biz podcast. Email him at allen@npsbank.com and connect on
LinkedIn https://www.linkedin.com/in/allenkopelman/ and
X @AllenKopelman.

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