A. An ELOC is the issuance of slightly discounted common stock in exchange for cash consideration, which allows a company to "draw down" capital over a fixed period of time. The benefit to the company is that it solely retains the right to choose the timing and amount it wishes to draw down, and therefore the level and pace of equity dilution, based on a contractual pre-determined formula. This structure is perfect for shares that are in an up-trend. In times when management considers itself "undervalued", they may choose not to draw down in order to prevent unnecessary dilution at what they perceive as a depressed price.

Q. What key elements of an ELOC or similiar instrument should I be cognizant of?

A. The key points to negotiating a successful ELOC are the following;

• Who is the Investor?
• Are there minimal draw down requirements?
• Are there any restrictions on any future financings?
• Are there any termination costs?

Q. Why Dutchess?

A. Only recently ELOCs have become a more popular financing tool for companies of all sizes, for over a decade the principals of Dutchess have been structuring ELOCs for companies. 

Tips for a successful Offering

1) Choosing an investor is the single most critical decision a company will make when executing a ELOC. However, ultimately it is the fundamental performance of the company in unison with the actions of the investor, not the investment instrument that makes for a successful offering. -Experience matters; select a specialized fund with expertise in niche financings.

2) Stay within your limitations -Weigh capital needs with market capitalization, stock price and trading volume to reduce dilution and create goodwill with current shareholders.

3) Plan ahead!

-Raise money when you can, not when you have to.