FAQs FBOs                                                                           

   

What alternatives are there to using FBOs?                               

 

       The current methods available tend to utilize the services of investment bankers, brokers and venture capitalists. Most if not all of the approaches used by these professionals requires the surrender of some equity by the original participants. The FBO approach is designed to avoid this result. 

 

--- How are the buyout ratios determined? 

 

       The concept which underlies the use of FBO financing is to attempt to balance the buyout ratio given at any time with the actual risk involved. For example if a company only has an idea, then in general -- all other things being constant -- the undertaking would be riskier than when a working prototype existed and thus a higher ratio would seem to be appropriate. 

 

       It is a question of attempting to determine the needs of a company for capital, that is the urgency of the use to which the capital will be put with actual risk. The idea is to attempt to evaluate the risk of future insolvency of the company -- which could bar the repayment of the note (with interest). In general, the buyout should properly be viewed as a bonus when things go well 

                                                                                     

 

 

 

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