Advice You - Finance

Running a business is a full-time job. Regardless of how much time and money you put into this, accumulating a business debt is sometimes inevitable due to several specific situations. Such as market instability and ba

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

d decisions made by management. Business loans get higher interest rates than personal loans, and this is one of the reasons why businesses accumulate such large amounts of debt.

Business debts are harder to pay beca

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

use if a company stops operating because of financial problems, debt will start accumulating just the same, and the interest rates and payment periods will become longer.

Banks and financial companies will give indebt

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

d businesses a low credit rating making it more difficult for them to acquire credit or loans. This is why business debts are more difficult to repair than any other type of debt.

Stephen Baker is a current business c

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

lient here at Commercial Debt Counseling and he is very interested in some issues about business debts that our professional counselor, James Banks will help explain.

Stephen Baker:

How can a business debt be finance

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

?

James Banks:

Mainly, there are two types of business financing methods. Debt finance and equity finance. The former, debt finance, is the one that banks and financial companies offer you to help face the business

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

debt. The most important benefit of debt financing is that it is limited and eventually, you will end up paying the whole sum down to zero. After that you will not have any further obligation with the lenders. The disa

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

dvantage of this type of financing is that the lender can, and will, take a very close look at your business taking into account income, costs, business’ time in existence, and you will have to use assets as collateral

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

for the loan. Debt finance will mean an extra monthly payment.

The latter, equity financing is the kind that you get from external investors. It is also called venture capital. You receive money in stocks in exchange

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

of equity in your business. The most important benefit is that you will not have to make any monthly payments to the investors. They will receive ownership interests constantly. This kind of financing allows more freed

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

m and less financial burden.

Stephen Baker:

So, what is the difference between a bank and an investor?

James Banks:

Conventional lenders such as banks take into account different characteristics than the investors

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

with venture capitals. Banks always look for a zero risk investment, and they pay extra attention to the internal financial situation and do not really care about a future growth of the business itself. They are mainly

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

interested in the cash flow and the assets required as a backup. The thing is that those two issues are the ones that most little businesses lack of. That is why business debts have become so common between these type

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

of businesses.

Then again, venture capitalists take into consideration the opposite characteristics that banks do not. Such as possible future growth, management team and how decisions are made. Remember, no matter

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

which financing style you choose they will always take a close look at your business. That is the main part to get rid of business debt.

Stephen Baker:

What is it that they look for?

James Banks:

Banks and venture

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

capitalists, both, will take a good look at two specific documents:

1. Business plan

2. Bank or loan request

These documents well managed, can get you a good lender or can bring the opposite if not put together well

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

. One recommendation we make to our business clients in order to avoid business debt and learn how to develop a plan, is to read a lot about new management ways or ask our professional counselors to receive advice in

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

certain topics.

Stephen Baker:

What are the recommendations when looking for a deal?

James Banks:

Look into several contacts in private capital before developing a deal with any of them. This way you will see diffe

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

ent contracts and several ideas. The contract should be first proof read by a professional and not just by you. Getting out of a business debt is not an easy task, but there are lots of possibilities to do it and wi

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

th a well organized business plan you can move forward. The most popular types of contracts are: royalty financing contracts, preferred stock and short term mortgage loans that have a time-frame of three to four years

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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