This is going to be 1 page analysis of the case. There is also an EXAMPLE of how the case should be done(apple case). The case that should be done is lit motors which is attached.
Case analysis assignments are designed to demonstrate your analytical abilities and your critical thinking skills. They are NOT summaries of the case.
For each assignment, you need to show:
– The top issues which you think prompted the case to be written
– Yourss the issue and the pros/cons of that action
Write the last paragraph as what you would do as an investor of the company.
greeNEWit: Financing the Next Level
Susan White, University of Maryland Karen Hallows, University of Maryland
Green. A color with a lot of meanings. e most immediate thought Josh Notes, cofounder of greeNEWit, an energy audit rm1 in Columbia, Maryland, had was the importance of green and clean energy to his company. Green also was
the color of money. In the rm’s ve year existence, it had made do primarily with loans from friends and family, $4.1 million in revenue in December 2012 and more growth expected in the future, greeNEWit needed more nancing options and longer term sources of this nancing to fund that growth. To date, the only long- term nancing had been modest equity contributions made by the founders. While the high growth of the early years was unlikely to continue, Josh and his partners needed to decide how to continue to grow in the future and to fund that growth. He realized the rm’s past sources of nancing were not sustainable. Not only did Josh believe that his energy audit business was helping families and improving the environ- ment, but he believed there was a multibillion dollar market waiting to be tapped. He expected that the next big area in the energy industry would be managing family energy usage and sustainable energy sources that could in turn transform the electric distribution system.
The Founders
Josh began his business career as a caddy, where he made a lot of contacts among golf- ers who later helped him start his own business. He graduated from the University of Maryland in 2006 with a degree in nance. “At the heart of the housing boom, eve- rything was good,” Josh said. “Just slap a derivative on anything and Wall Street loved it.” With his brother, Zach, and a friend from school, Josh formed Terrapin Ventures I, a real estate investment trust. e trust raised $110,000 and made a 7 percent gain its rst year. Terrapin Ventures II, a new fund started in 2008, crashed and burned when the housing bubble burst, with the $140,000 investment taking a 53 percent loss. Josh
Copyright © 2016 by the Case Research Journal and by Susan White and Karen Hallows. An earlier ver- sion of this case was presented at the North American Case Research Association Conference in Austin, Texas, October 2014. Some names in the case have been disguised to preserve anonymity.
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NA0401
did not let this experience discourage him from being an entrepreneur. “I don’t take ‘no’ for an answer unless I hear it 30 times or more. But you also need a plan B if plan A doesn’t work,” he said. A proponent of the “Lean StartUp” philosophy, Josh believed in the idea of adapting quickly.2
Josh’s interest in energy sources and uses led him to connect with greeNEWit’s cofounders Jason Jannati and Matej Harangozo, whom Josh described as optimists with insane risk pro les. e three conceived the idea for their rm in late 2007 while they were all separately involved in real estate in some capacity. While they had com- mon ground as their work as real estate professionals, none of them were entirely ful lled with what they were doing and wanted more. Josh explained how working in real estate led to the idea behind greeNEWit:
At its peak, my real estate fund owned 35 homes in the Baltimore area. I got notices from the city that the lawns needed cutting on many of the properties or there were other maintenance issues. In working to prevent code violations on the properties, I realized that the occupied properties had operating expenses and could use help with energy and its interconnections. If we could help people save money and make their homes more comfortable, we could be relevant.
As the friends further realized their common interests, they started spending more time together planning what would become greeNEWit. Josh shared his experience majoring in nance at the University of Maryland and they each learned more about each other’s jobs, backgrounds, passions. Jason attended Lycoming College in Pennsyl- vania and studied communication while Matej worked to obtain a degree in mechanical engineering from the University of Maryland Baltimore County. e three furthered their education by becoming BPI (Building Performance Institute) certi ed.3 It was there that the partners learned how a home operated and how homeowners could control their energy usage. According to Josh, greeNEWit was in the business of anti- consumption—teaching people to use less.
A MATTer oF CoMMon sense
e founders knew that conserving energy and natural resources was a matter of com- mon sense. ey believed that making life, energy, and our planet better every day was achievable through their actions and of those around them. Speci cally, their families— along with their neighbors and friends—had high energy bills. rough research, they learned that the people who solved these problems were energy auditors. ey thought this would be the easiest way to enter the energy marketplace. e energy audit busi- ness was a service business requiring less start-up funding, unlike electric generation and distribution which were highly capital intensive. ey decided to plunge into this new business—and acquire on the job training—and greeNEWIt was born in 2008.
greeNEWit’s owners were strong in di erent areas with talents that complemented each other. ey believed that this was one of their greatest assets. Josh had a strong background in business strategy, operations, accounting, and nance that was critical to the organization. He also brought a great deal of industry knowledge as he was a founding member of the Mid-Atlantic Chapter of E ciency First (www.e ciency rst. org) and was a national contributor to the home performance workforce best practices committee. Jason was the rm’s brand strategist, in charge of the company’s marketing e orts and responsible for de ning the high-level strategic marketing direction and a liate partner initiatives. Matej was the innovative technologist and web/software
2 Case Research Journal • Volume 36 • Issue 2 • Spring 2016
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systems visionary. He developed the software platform and information integration protocols for the rm and was a member of the Home Performance Data Standard XML Board and Howard County Tech Council.
As comprehensive energy consultants, the three owners provided energy audits to Maryland homeowners and renters and delivered quick home energy check-ups to multifamily properties and single-family homes. greeNEWit provided some imme- diate savings through things such as installation of energy e cient light bulbs and water-saving showerheads on the spot. ey also provided suggestions to homeowners about how to further reduce energy through home improvements such as additional attic insulation.
The greATessT
“ e industry is in need of greater operational e ciency,” according to Josh. greeNEWit developed a software platform, called gREATESST, that helped facilitate the work of both energy industry employees and governmental regulators. It was developed to address the administrative burden plaguing contractors and program administrators in the energy e ciency industry. gREATESST stood for Globally Recognized E ciency Automated Technology with Engineered Systems, Solutions and Training. It started out as an Excel spreadsheet and a few macros that automated processes. Josh explained the genesis of the acronym: “We were joking about this—that we didn’t just need a system—we needed the greatest system. We couldn’t think of an acronym without the extra S.”
is software digitized the paperwork needed to obtain utility and government rebates, and created a exible interface mapping the pages that needed to be lled out. An energy e ciency worker could complete the forms for a customer in the eld using the gREATESST software, return to the o ce and upload the data into a data- base, send the forms electronically to the utility, and the utility paid the rebate. Josh explained:
Without this software, home and business energy auditors would need to ll in infor- mation on a clipboard, scan it into their company’s data base, re-enter the information if it didn’t match, and resubmit, a very cumbersome process, especially if you were doing many energy check-ups in a day. e software also provides a comprehensive checklist and a detailed action plan for the homeowner. A report that used to take 3–4 hours now can be created in minutes.
Even very energy-conscious consumers, with regular home maintenance schedules, were often unaware about how their home interacted with its energy systems. Josh continued, “Many consumers were unaware of the important role played by the least visited part of their home, the attic. Maybe the attic was insu ciently insulated, or unevenly insulated, leading to cold and hot spots throughout the home. Maybe the hidden ductwork in the basement or attic needed repair. e energy audit looked into corners that homeowners rarely see.” Josh’s long-term plan was to increase licensing of this software nationwide.
greeNEWit: Financing the Next Level 3
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speCiFiC Business Lines
Quick Home Energy Check-ups
greeNEWit contracted with the local utilities to implement some of their energy e ciency programs. One popular program was the Quick Home Energy Check-up Program (QHEC, pronounced Q-heck), which allowed single family and multifamily properties to get energy-e cient products installed at no additional charge as part of the Empower Maryland legislation. Under this program, funded by utility ratepayers, employees visited homes, multifamily apartments, or condo units and installed energy conservation measures where needed.
By the end of 2012, greeNEWit installed 418,224 compact uorescent light bulbs in more than 43,107 residences in Maryland, which saved 18,550,915 kWh of elec- tricity and 427,747,132 gallons of water annually. e rm started out with more comprehensive residential energy audits, but moved to QHEC’s because of the higher volume.
Home Performance with Energy Star Energy Audits
e Home Performance with ENERGY STAR® Energy Audit was another part of greeNEWit’s portfolio of services that could help improve a home’s comfort, energy e ciency, durability, and safety while lowering utility bills for homeowners. e energy audit pinpointed how speci c improvements throughout a home could work together to make the entire home more comfortable and save money.4
Commercial Services
“Energy services to apartment buildings are often heavily subsidized programs. is means that the utility pays and the company receives the bene t without needing to make a large nancial outlay,” Josh said. Because this was lucrative and provided a needed service, greeNEWit moved into providing consulting services to commercial rms and multifamily properties across the nation. e company o ered a comprehen- sive approach to building e ciency that included system evaluations, do-it-yourself energy saving practices, upgrades and occupant and operator training programs.
Utility Rebate Analysis
greeNEWit o ered solutions focusing on energy and water saving upgrades for multi- family properties through their data analysis and information gathering services. Here, greeNEWit took a customer’s utility bills, occupancy data, and energy incentive data for a speci c location and developed a portfolio of energy e ciency suggestions. ese recommendations could include which properties would bene t the most from retro- tting energy e ciency upgrades. e company partnered with local rms that did the actual work that was needed to make the property more energy e cient. greeNEWit operated its utility rebate analysis primarily in Maryland, Pennsylvania, Virginia, Dis- trict of Columbia, Delaware, and New Jersey.
4 Case Research Journal • Volume 36 • Issue 2 • Spring 2016
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Energy Adviser Training
greeNEWit worked with national utility companies to provide training services that allowed utilities to better manage customer inquiries and provided recommendations that added value while creating energy saving opportunities. e training taught cus- tomer service representatives to teach customers about ways they could manage energy costs and consumption. According to Josh:
We give them an intensive three-day energy lesson so they will be able to think like energy auditors. We also provide the utilities with a customer service strategy, teach customer representatives how to better answer customer questions and how to present energy solutions in a patient, non-argumentative way.
e company trained more than 100 energy advisers employed by a local electric utility which served millions of customers in the Mid-Atlantic region.5
e rm gained local brand recognition through a variety of awards. greeNEWit’s founders won the Horizon Foundation’s Gira e Award (for sticking their necks out), becoming standout social entrepreneurs. e rm was named Green Company of the Year in 2012 by the Howard County Technology Council and made the U.S. Cham- ber of Commerce list of 100 Best in Small Business in 2013. Josh was on the list 14 Young Entrepreneurs to Watch in Washington DC by Under30CEO, and was on the 30 under 30 list in Home Energy Magazine. He was named Maryland Green Entrepre- neur in 2012. e three cofounders were also recognized at the White House for their contributions to America’s economy and entrepreneurship.
CoMpeTiTion
greeNEWit faced a great deal of competition in the areas it served. One of the rm’s main competitors was BGE Home, a company spun o from Baltimore Gas and Elec- tric (BGE), one of the larger Maryland gas and electric utilities. BGE Home provided energy audits, sold and installed furnaces and hot water heaters, and sold plumbing and HVAC (heating, ventilation, and air conditioning) services. Josh estimated that there were up to 100 competitors providing similar services, although BGE Home was the largest. Information about large, publicly traded companies in roughly the same line of business is in Exhibit 1 and information about comparable transactions for smaller companies in greeNEWit’s industry is in Exhibit 2. According to IBISWorld, the energy consulting industry, which focused on residential and commercial energy e ciency, was expected to grow 5 percent–6 percent from 2013–2016. is was about double the expected 2.5 percent long-term growth in GDP (Gross Domestic Product).
greeNEWit: Financing the Next Level 5
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Exhibit 1: Comparable Public Companies Ecology and Environment, Inc.
Ecology and Environment, Inc., an environmental consulting rm, had services includ- ing environmental impact assessments, feasibility and siting studies, and permitting and due diligence audits. It consulted with corporations and governments concerning incident management, emergency response, hazardous waste site evaluations, environmental restoration and incorporating green elements into the organization. Founded in 1970, the rm was headquartered in Lancaster, New York.
Willdan Group (WLDN)
Willdan Group, Inc., and its subsidiaries, provided consulting services to governments and governmental agencies concerning building safety, code enforcement, development plan review, disaster recovery, environmental remediation, energy ef ciency, sustainabil- ity and climate action plans, federal compliance, and homeland security areas such as disaster preparedness. Willdan Group, Inc. was founded in 1964 and headquartered in Anaheim, California.
SmartPros (SPRO)
SmartPros Ltd., provided learning and training solutions in the areas of nance, law, engi- neering, insurance, banking, and information technology. The rm provided training in nance, taxation, ethics, health and safety, compliance and human resources. SmartPros Ltd. was founded in 1981 and was headquartered in Hawthorne, New York. Company Ecology and Environment Willdan Group SmartPros Data as of 7/31/12 Beta 0.81 Price $11.19
12/28/12 1.0 $3.61 7.38 M 93,443 K 19,255 K –17,300 K 124 K 3,780 41,977 K 1,782 K 24,128 K 48,146 35%
12/31/12 –0.01 $2.14 4.68 M 8,855 K 1,178 K –1,895 K 0 0 15,956 K 8,363 K 6,045 K 9,847 K 20%
Shares outstanding Revenue Operating income Net income
Long term debtCurrent portion of long term debt AssetsCurrent assetsCurrent liabilitiesBook value equityTax rate
4.25 M 155,410 K 4,784 K 774 K 103 K 12,798 97,512 K 82,546 K 44,035 K 48,146 35%
Source: Thomson One
6 Case Research Journal • Volume 36 • Issue 2 • Spring 2016
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Exhibit 2: GreeNEWit Comparable Multiples and Transactions
Small Company DataPart A—NAICS Code 541350: Home Inspection Companies (6 Transactions) Statistic Count Range Mean Median Sale dateNet salesMarket value of invested capital (MVIC) EBITDAEBITNet incomeGross pro t marginOperating pro t marginNet pro t marginMVIC/Net salesMVIC/Gross pro tMVIC/EBITMVIC/EBITDAMVIC/EarningsMVIC/Book value of invested capital
6 10/2/2008–10/10/2013 6 $29,090–$1,893,721 6 $26,500–$6,849,605 5 ($1,710,108)–$797,563 6 ($1,734,065)–$797,563 5 ($2,024,228)–$797,563 6 0.52–1.00 6 –2.64 5 –2.96 6 0.50–7.61 6 0.54–14.51 5 1.28–69.24 4 2.63–32.88 4 1.72–4.50 1 5.33
N/A N/A $719,401 $607,485 $1,800,351 $878,000 ($106,631) $21,762 ($89,843) $20,467 ($166,642) $20,746 0.85 0.94 –0.06 0.2 –0.15 0.33 2.06 1.01 3.33 1.03 17.08 4.5 11.8 5.83 3.16 3.21 N/A N/A
Part B—NAICS Code: 236118 Restoration Contractors
(20 Transactions) Statistic Count Range Mean Median Sale dateNet salesMarket value of invested capital (MVIC) EBITDAEBITNet incomeGross pro t marginOperating pro t marginNet pro t marginMVIC/Net salesMVIC/Gross pro tMVIC/EBITMVIC/EBITDAMVIC/EarningsMVIC/Book Value of Invested Capital
20 3/14/2008–10/25/2013 20 $139,488–$3,102,393 20 $55,000–$1,200,000 16 ($10,226)–$366,530 20 ($33,563)–$358,507 20 ($33,898)–$325,808 20 0.20–1.00 20 –0.5 20 –0.5 20 0.13–0.95 20 0.21–2.67 17 0.58–14.58 14 0.58–14.56 16 0.58–4.42
5 1.08–5.41
N/A N/A $1,009,882 $819,284 $481,100 $467,500 $114,378 $98,352 $90,465 $54,943 $82,585 $52,359 0.65 0.71 0.13 0.1 0.12 0.07 0.54 0.57 0.96 0.9 6.36 4.57 5.56 3.23 2.55 2.37 2.82 1.26
Source: Pratts Stats
greeNEWit: Financing the Next Level 7
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eMpower MAryLAnd energy eFFiCienCy ACT oF 2008
e Empower Maryland Energy E ciency Act of 2008 required Maryland electric consumers to pay a surcharge to fund energy e ciency programs. e state’s goal was to reduce per capita energy consumption by 15 percent by 2015. e act paid for many of the services provided by greeNEWit. “ e state decided the best way to incentivize energy demand reduction was to place a small tax on all electricity users and redis- tribute it back to users for energy conservation purposes,” Josh said. Although the act speci cally targeted residential customers, the Empower Maryland funds were primar- ily used by commercial and multifamily property owners since commercial enterprises and apartments consumed more energy than single family homes. Commercial energy audits created more revenues for greeNEWit. One of Josh’s goals was to get the word out to more residential electric customers about energy audits.
greenewiT’s ChAriTABLe CAMpAigns
One of the growing items on the rm’s income statement was “executive team expenses,” which included donations made by the rm to sustainable energy education projects. e OUR Schools Program7 was started by greeNEWit to provide energy education at no cost to public schools. It included sustainability-focused elementary school assem- blies along with lesson plans and curricula for Maryland teachers to educate students, sta and other administrators about the importance of sustainability and reduced energy consumption. In addition, the company created an energy savings incentive which gave back $20 for each completed QHEC and $40 for each completed energy audit to the schools. e program had reached thousands of students in four Mary- land counties and had provided funds for extracurricular environmental clubs, school energy e ciency upgrades, Green Schools certi cation, and environmental eld trips. (greeNEWit also extended this model to reach nonpro ts and faith based organiza- tions in the community.)
greeNEWit also started Cleats for Bare Feet to obtain donated athletic shoes and sports equipment and give them to disadvantaged youths worldwide. is social initia- tive completed a 45-day campaign in May through the crowdfunding site, Indiegogo. rough the website, donors could track the whereabouts of their donations and connect with the end recipient of soccer cleats and other sporting equipment. e program had collected 6,000 pairs of shoes and distributed them to Haiti, Kenya, Jamaica, South Africa, Zimbabwe, China, Senegal, and the U.S.
Both Cleats for Bare Feet and the OUR Schools Program were part of the rm’s Agents of Change (AOC) Internship Program designed to mentor high school and college students about entrepreneurship. Interns received educational credits for par- ticipating. Each AOC was assigned to a project and asked to develop his or her own innovative and creative ideas to nd a solution.
As part of a partnership with Opportunity International, a micro-lender and chari- table organization, greeNEWit gave gift cards for loans to micro-entrepreneurs. Firm employees could choose an entrepreneur in one of twenty countries where Opportu- nity International operated to lend the entrepreneurs money and follow the results of the loans.
greeNEWit also looked closer to home to provide jobs for people who tradi- tionally had di culty nding jobs. One of the rm’s advertising vehicles was sign
8 Case Research Journal • Volume 36 • Issue 2 • Spring 2016
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spinning—hiring people to twirl signs on the streets to advertise their services.8 eir sign spinners worked 100,000 hours in a year and had the 2009 nation’s fastest spinner on their team. Josh noted that this provided jobs to inner city youth and paid more than minimum wage.
pAsT And FuTure FinAnCing
e rm’s nancial statements for its ve years of existence are in Exhibit 3 and market information in Exhibit 4. greeNEWit’s revenues had grown exponentially in a short period of time, from $17,250 to $4.1 million in just ve years. e rm’s revenues made their biggest jump from $387,900 in 2011 to $4.1 million the following year. e increase in revenues came from a contract with a single utility client and signaled a big change in the size and scope of the rm. Josh noted, “You’re never ready for this kind of ramp-up. We made mistakes because we were undercapitalized, such as taking on jobs we weren’t equipped to handle yet.” Exhibit 3: greeNEWit Financial Statements, 2008–2012 Income Statement 2008
2009
$2,967 $78,106 $3,500 $0 $84,572 $5,444 $79,128
2010
$31,755 $85,442 $1,811 $51,311 $184,763 $840 $183,923
$3,942
$4,895 $23,870 $0 $10,524 $2,785 $81,055 $17,054 $6,467 $0 $150,592 $33,331 $4,152 $2,177 $27,001
2011
$3,139 $332,202 $0 $48,484 $387,900 $49,842 $338,058
$3,613
$1,305 $46,166 $0 $26,628 $3,113 $100,993 $16,486 $7,394 $0 $205,698 $132,360 $8,156 $1,537 $122,668
2012
$14,877 $4,012,114 $0 $45,832 $4,073,509 $1,059,502 $3,014,007
$43,623
$27,444 $132,547 $0 $149,416 $23,103 $1,297,384 $274,029 $138,568 $1,577 $2,009,932 $1,004,075 $12,793 $1,979 $911,545
Income
General Income $100 Residential Energy Solutions $17,150 Commercial Energy Solutions $0 Consulting, Training, and Administration $0 Total Income $17,250 Cost of Goods Sold $0 Gross Pro t $17,250 Expenses
Accounting Expenses $235 Depreciation $0
$759 $5,843 $12,501 $59 $13,752 $1,679 $30,729 Travel, Rent and Other $4,307 $10,535 Executive Team Expenses $297 $2,425
Admin, O ce, and Tech ManagementSmall ToolsMarketing and SalesInsurance $694 Payroll $0
$5,167 $66 $7,264
Processing/Reimbursements $79
$153 $78,435 $694 $622 $600 –$528
$18,109 –$859 $0 Taxes $39 Net Income –$898
Total Operational Expenses
Operating Pro t Interest Expense
greeNEWit: Financing the Next Level 9
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Balance Sheet
ASSETSCurrent Assets
2008
2009 2010
293 9,318 950 33,914 0 0 0 0 698 0 1,941 43,232 19,525 27,682 0 0 0 0 10,558 0 30,083 27,682 5,843 24,420 24,240 3,262 26,181 46,494
0 150 10,936 35,930 1,000 42,502 0 476 0 675 590 0 #REF! 79,733 #REF! 79,733
6,639 –18,582 6,728 –19,676 1,100 –21,982
0 0 0 0 0 0
–823 27,002 13,644 –33,239 #REF! 46,494
2011
98,479 153,783 15,765 0 0 268,027 27,682 0 0 0 27,682 25,725 1,957 269,984
8,736 36,878 129,793 0 5,654 0 181,062 181,062
–9,384 –11,574 –12,788
0 0 0
122,668 88,922 269,984
2012
5,789 953,442 6 7,000 0 966,237 13,089 41,007 25,610 0 79,706 53,169 26,537 992,774
68,226 9,358 70,000 0 86,855 0 234,439 234,439
31,514 29,314 28,097
–78,627 –85,481 –78,027 911,545 758,336 992,774
Cash 9,637 Accounts Receivable 0 Inventory 0
Loans (Current portion)Other Current AssetsTotal Current AssetsFurniture and EquipmentComputer and Technology Equipment Leasehold Improvements
SoftwareGross Fixed Assets DepreciationNet Fixed AssetsTOTAL ASSETS LIABILITIES AND EQUITY
Current Liabilities
Accounts PayableCredit CardsNotes PayablePayroll LiabilitiesTax LiabilitiesOther Current Liabilities Total Current Liabilities Total Liabilities
Equity
Josh Notes Equity Investment Jason Jannati Equity Investment Matej Harangozo Eq Investme Josh Partner Distribution
Jason Partner Distribution Matej Partner Distribution Retained Earnings
Total EquityTOTAL LIABILITIES AND EQUITY
0
0 9,637 13,682 0 0 0 0 0 13,682 23,319
0 0 0 0 0 0 0 0
7,439 8,458 7,716
0 0 0
–294 23,319 23,319
10 Case Research Journal • Volume 36 • Issue 2 • Spring 2016
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Exhibit 4: Financial Market Information
Risk free rate (10 year bond rate, as on 12/12, from www.federalreserve.gov) Equity risk premiumSmall company risk premium (in addition to the large company risk premium) Cost of high yield debt
L.T. U.S. Treasury Bond Yield (20 year)
L.T. historical expected equity risk premium: Large company stock total returns minus L. T. government bond income returns
L.T. supply side expected equity risk premium: Historical equity risk premium minus price to equity ratio calculated using 3-year average returns
Source: Ibbotson and Associate, Stocks, Bonds, Bills, and In ation 2011 Yearbook
1.84%
6.00% 10.00% 11.00%
3.00% 6.5%
5.7%
greeNEWit had a variety of sources for funding in the past—credit cards, then friends and family nancing, then bank lines of credit. e rm’s rst funding in 2007 came from Josh, Matej, and Jason’s personal credit cards, still open now but unused for several years. e total borrowing power from the three cards together was $29,200. Two years later the three founders took out second personal credits cards, for addi- tional funding of $18,500. A year later, each obtained yet another personal card for an additional borrowing capacity of $23,500. In all, Josh was responsible for credit cards with limits of $32,500, Jason for $20,000, and Mataj for $18,700. e credit cards carried interest rates from 4 percent (introductory rate) to 12 percent. eir credit card strategy was to make sure that they did not borrow the maximum allowable amount on their credit cards. Josh explained:
All three of us pledged everything we could. I researched what went into credit scores. For example, I knew that you should not borrow more than 80 percent of allowable credit. We always made more than the minimum payment, but not much more. We found that the more we borrowed the better credit we had. If I got denied for one card, I opened one at another bank. At one point, I had 13 credit cards open, all getting close to that 80 percent maximum.
Josh and his partners depended on low promotional interest rates, transferred bal- ances frequently, and took money from one credit card to make payments on another one. “It was a juggling act. It was hard to believe someone from the bank wasn’t at my door, asking ‘what are you doing?’” Josh continued. “I don’t think I’d want to do that again. I have a baby now, and my risk pro le has changed. But at the time it seemed like the right thing to do. I understood that if it didn’t work out, we would all ruin our credit. Using credit cards the way we did was like jumping o a cli and trying to land on the right lily pad.” greeNEWit continued to use credit cards, but rm cards, rather than personal credit. e rm had two credit cards with an available balance of $35,000.
e rm’s rst outside nancing came from a $25,000 loan from the Howard County Economic Development Authority (HCEDA). e loan was for two years, with 8 percent interest and was personally guaranteed by the three founders. With the backing of the HCEDA, greeNEWit was able to obtain a working capital line of credit from a local bank for an additional $25,000 at a 2 percent interest rate. e loan was backed by the Small Business Administration. greeNEWit used part of the HCEDA loan to hire employees in new roles and to help develop gREATESST. “ ese loans
greeNEWi
