Topic: [Funded] Tangible Cryptography LLC seeks LoC to expand working capital - page 2. (Read 2841 times)

This is a typo, correct?

Solid post as usual.  Is Mtgox USD accepted for the USD LoC?

Tangible Cryptography LLC seeks Line of Credit to expand working capital

Background:
Tangible Cryptography LLC is a manager-managed limited liability company registered in Virginia.  It is privately held with three members (LLC equivalent of shareholders).  Tangible Cryptography has operated the FastCash4Bitcoin service profitably for roughly nine months.  During that time it transitioned from a manual service to provide quicker Dwolla withdrawals for a certain exchange to an independent sales portal which offers same day payouts on bitcoin sales.  The daily volume exceeds many major exchanges.  Our customer feedback continues to be spotless with no unresolved issues.  When we buy a client's coins it is because we can pay them.  Despite nearly quadrupling monthly sales volume in 2012, sales volume in January was 37% higher on a USD basis and 11 higher on a BTC basis compared to the prior month.  
 At the current time the company has ~$190K in cash (and cash equivalents) and ~$260K in total assets.  The company's only debt at this time is Loc C & D which consist of 500 BTC and $50,000 USD.  Loc A & B have been paid in full.  Interest obligations on existing debt is less than 5 BTC and $1,000 USD per month.  Sales volume for the prior 30 days was ~$600,000 and the company collected a gross profit margin of 3.87%.  

Operation:
We purchase bitcoins from clients using our FastCash4Bitcoins service.  These purchases are made at a discount to the "MtGox last price".   The amount of discount used varies base on current volatility, and current fund balances (BTC vs USD).   Since 01/05 we have opted to keep the discount fixed at 2.99%.  The acquired coins are then sold on multiple exchanges, to other bitcoin related companies, or in “direct sales” to large buyers under the brand name Bitcoins Direct.  Bitcoins Direct has helped us convert coin liquidation from a cost to a secondary source of income.   For the prior 30 days coin sales contributed 0.88% of the gross margin of 3.87%.  We have discontinued our CellCoin and escrow services in order to refocus on our core business model.  

Purpose & Scope:
The purpose of the loans hasn't changed since we originally sought the funds in Loc C & D however our daily volume has increased by roughly 71% since we originally secured those notes.  In order to meet the needs of increased working capital we are seeking to double the Loc C from 500 BTC to 1,000 BTC and Loc D from $50,000 USD to $100,000 USD.  The loans are interest only with no defined maturity date.  The note will be repaid in full within 30 days once called by lender.   Tangible Cryptography can repaid part of all of the principal at anytime without penalty.

Notes proposed:

Line of Credit C (LocC)
Current Bid:  150 BTC @ 4.5%, 350 BTC @ 12%
Amount: 500 BTC
Denomination:  Bitcoins
Repayment:  Interest only payment made monthly.  When note is called principal will be repaid within 30 days.
Interest: max of 12% annually - note bidding is a reverse auction which ends 2/6/2012 @ 23:59:59 UTC.


Line of Credit D (LocD)
Current Bid: $50,000 @ 24% annually
Amount: $50,000 USD
Denomination:  USD
Repayment:  Interest only payment made monthly.  When note is called principal will be repaid within 30 days.
Interest:  max of 24% annually - note bidding is a reverse auction which ends 2/6/2012 @ 23:59:59 UTC.
This note is denominated in USD.   The note can be funded with BTC transfer, cash deposit, bank wire, or MtGox USD code.   Repayment of interest is available as BTC transfer, ACH, MtGox USD code, or if a creditor is owed more than $500 by Bank Wire.  If BTC transfer is used for funding or repayment the exchange rate used will be the "MtGox 24 hour volume weighted average price" at the time of the payment.  

Lender risks and mitigation:

Risk: hacking or other bitcoin loss resulting in inability to repay.  We used encrypted offline wallets (commonly called a "cold wallet").   which is kept offline.  Encrypted backups are maintained as well as encrypted paper printouts of private keys.  Both digital and paper backups are stored offsite to provide redundant backups.  All of our exchange, bank and PayPal accounts employ strong passwords and two factor authentication.  Bitcoins are spread out across the cold wallet and exchange accounts minimizing the number of coins that would be affected by any single breach.  We used dedicated server (no VPS accounts with super admin backdoor).  While the risk of a hack can never be eliminated our technology and business processes are used to minimize the risk and compartmentalize any loss that would result from a breach.

Risk: closure of account or freezing of funds by Dwolla or PayPal. Company policy limits either account to no more than 10% of our working capital in accounts with either provider.  We use these accounts "one way".  The accounts are funded by bank transfers and used to payout clients.  We never allow clients to send us funds by PayPal or Dwolla which eliminates the risk of chargeback or disputes that could result in account closure.  We have provided information to Dwolla compliance department on our business procedures however despite multiple inquiries they have no provided us with written approval to operate as a "virtual currency exchange".  The PayPal account is a corporate account in the name of Tangible Cryptography LLC.  We always pay PayPal for using their service and don't attempt unsustainable hacks like marking payments as “gifts”. Since we offer a diversified set of payment options a freeze on one of these accounts would make us less attractive to customers it wouldn't be fatal to the company.  Payment by PayPal and Dwolla represents roughly 11.6% and 7.2% of total volume respectively.  

Risk: lendee has no intention on repaying (aka "scam").  While this is a risk in any loan, Tangible Cryptography LLC is registered with the Virginia Corporation commission.  Our business model provides a high return on invested capital (ROIC) and our "brand" would be destroyed by a default.  Simply put we make a good margin off your money and there is no reason to change that.  We have been doing this for nine months now and are solidly profitable.  

Why not seek traditional funding:
We have a significant amount of goodwill towards the lenders who stepped up when we needing funding in the past.  While other lenders were busy defending the sustainability of 7% per week ponzis some lenders were willing to accept more sensible returns.  They haven't lost their principal and we have paid out consistent interest payments.   The lending forum being filled almost exclusively with HYIP scams and "payday loan" offers 100%+ APR) does the community a disservice.  We hope to offer an alternative.   We feel this can be a win-win for both creditor and debtor.  For a small startup a bank loan is simply not going to happen.  At this point we are not willing to accept the dillution which would come from venture capital.

How to bid:
Send a PM with the LoC, the amount, and the min interest rate you will accept (annually).  In the event our offer is oversubscribed we will take lowest bids (reverse auction).   We will leave the offer open until 2/6/2013 @ 23:59:59 UTC.  If a bid is received within one hour of the auction end the auction end will be extended one hour.  To reduce the processing work the minimum amount per creditor is 100 BTC or $1,000 USD.  Interest rates should be in increments of 0.25%.   These notes are debt only they offer no equity or equity derivatives (options, warrants, revenue sharing contract, etc).  We are not entertaining any offers for equity sale at this time.  

Thank you for your consideration,

Staff
Tangible Cryptography LLC