The Importance Of A Good Finance Strategy For many members of the contact center community, one of the biggest frustrations is being unable to find the financing they need. As a result, they may: -
Lose unexpected opportunities because they have no cash on hand to build up staff and working space -
Incur continued expenses without the supporting revenue due to contract non-renewals -
Fail to meet payables while waiting for collection on receivables -
Fall behind on recurring payments, such as current loan installments and payroll -
Experience stifled growth That's why a solid understanding of the financing world is as important as the ability to hire effectively and schedule agents to meet demand. The future of your company may depend on being able to source financing at a crucial moment. | Gretchen Gordon Vice President – Business Development Textron Financial |
Build The Relationship Before You Need It Just as you should have an insurance policy in place before you need to make a claim, you should build a relationship with your financiers before you need capital. For any financier, it takes time to gather and analyze information on your company before extending credit. You can accelerate this process by anticipating the information that your potential financier will ask you to provide. There are two major types of information: Industry Understanding Make sure that your financial source is familiar with your industry. Be prepared to discuss the industry's: -
Strengths – including its ability to respond quickly to opportunities -
Weaknesses – including difficulty attracting first-rate agents; lack of career paths; and employee turnover. Be certain you explain how you will deal with these problems. -
Opportunities – including the flexibility to cultivate a particular niche, such as software customer support and medical support -
Threats – including competition from lower-cost locations, especially in the U.S. where work is relocating to Canada, the Philippines and India -
Success Factors – including staff scheduling that efficiently accommodates call volumes; effective supervision; staff retention; and a successful sales force. Again, be sure to point out how your business exemplifies these qualities. You will find that financiers vary in their familiarity with your issues. You may need to provide a good deal of education about your industry. Company Understanding Once you feel your financier understands the industry, you can move on to describing how your company fits into the industry picture. Financiers look at several factors: -
Financials – a comparison of your company's statistics, such as calls handled per agent, with those of other companies in the sector -
Management – the experience level of your management team. This factor will strongly influence your financier's decision, so be prepared to "sell" the strengths of your managers and demonstrate how you will deal with their limitations -
Contracts – what contracts, steady customers, and prospective customers you have, the maturity of the contracts, and their likelihood of renewal Nurture the relationship -
Make sure your paperwork is complete, current and on file with the financier. -
If any changes occur, remember to contact the financier to update your information. -
Check in occasionally to keep the relationship active and cordial. Understanding Financing Types To work effectively with a financier, it is important to understand the difference between the two main types of capital sources: Traditional Financiers Traditional financiers include consumer banks, merchant banks, credit unions, and savings & loans. Advantages | Disadvantages | - May offer slightly lower cost of capital
- May offer other services, such as checking, deposits and cash management
| - Slower decision process
- May require more detailed information from you, which will take additional time to prepare
- More restrictive requirements or covenants, such as maintaining key financial ratios
- May require more education about the nature of your business and industry
| Specialty Financiers Specialty finance sources concentrate on understanding and financing certain niches, such as the contact center industry. Advantages | Disadvantages | - Likely to have experience with similar companies, and need little or no education
- May be able to provide a quicker answer and extend more capital immediately
- May have less rigorous covenants and agreements because of their familiarity with your industry
| - May have fewer other services to offer
| Many specialty lenders provide capital in a variety of ways, often through asset-based lending or factoring: -
Asset-based lenders lend you money based on collateral, which can include amounts owed to you. -
Factors actually buy your assets, generally receivables. Traditional lenders usually deal with larger, more established entities that can meet their covenant requirements. Specialty lenders tend to be more innovative in their lending policies, and are often willing to consider offers that would lie outside a traditional lender's comfort zone. In building a relationship with your financial source, you may find that specialty lenders have developed a better understanding of your industry and can work with its strengths. For example, a lender may be willing to advance you more money at a lower implied cost of capital, based on your company's record of payment from its customers. About Gretchen Gordon: Gretchen Gordon is a Vice President – Business Development of the Growth Capital Division within Textron Financial Corporation's Asset-Based Lending Group. About Texton Inc.: Textron Inc. is an $11 billion multi-industry company with 49,000 employees in 40 countries. The company leverages its global network of businesses to provide customers with solutions and services in industries such as aircraft, industrial products and components, fastening systems and finance. Textron is known around the world for its powerful brands such as Bell Helico pter, Cessna Aircraft, Kautex, Lycoming, E-Z-Go and Greenlee, among others. |
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