One of the more common requests the past few months has been around being able to expand credit lines with distribution or financial institutions. The frantic calls usually involve a very large sale that exceeds the minimal credit capacity that most partners often have available. The good news is that end customers seem to be spending money again. The bad news is that many partners have done nothing to prepare for the increased demand and credit needs, so now it goes into crisis mode to try and land that big deal that puts one over the top.
Rule #1 – We live in a new world. No matter what your experience has been previously, the rules have changed. There are much tighter views being taken on credit and the requirements are definitely increasing. So expect it to be more difficult and be prepared to share more information.
Rule #2 – Get credit capacity before you need it. This has not changed. Far too many partners are completely undercapitalized as a company and then wonder why everyone is not signing up to give them unlimited capital. Financial institutions loan money based on a few factors. Like being profitable over time. Seems a little unfair doesn’t it? They expect us to make money every year? Yes they do. They also expect you to leave earnings in the business. That is called equity. And it is necessary to grow your credit capacity. If you spend it all or take it out there is no increased value in the company. Banks don’t loan based on your managed service contracts. They loan based on equity and past performance.
Rule #3 – Prepare to provide a lot more documentation. For a long time, many financial institutions loaned money based on character as much as facts. Those days are rapidly leaving us. You need financials and business plans and budgets and projections and a strong reason to convince them that you will pay back any funds you borrow. They will likely require a personal signature to get credit. It is not unfair or unusual.
Rule #4 – Make money. The bottom line is that it is important to run your company profitably. Look in the mirror and ask yourself if you would loan someone else money that has a profit structure like yours. Many partners show a loss or very minor profit each year. That does not lead to a solid loan application. Your EBITDA % is critical – first to know and understand – but then to grow so you are accumulating some profits. That is why benchmarking is so critical to partners to participate in and understand. How can you improve if you are unsure how you are performing compared to others? Analyze your performance and make sure you are profitable.
Rule #5 – Be creative. There are ways to work around most credit situations. HTG is ready to help you if you find yourself in a position of opportunity but struggling with credit. There are many alternative ways to structure deals so you don’t lose the opportunity. Get engaged as soon as you know the need may arise. It is always better to ask before you need it than to be scrambling when you are against a timeline.
HTG has a special arrangement with Ingram Micro to accelerate credit line reviews based on the following guidelines. Please review the guidance below that they have shared to make the process flow more smoothly when you request a review:
It is no secret that today’s financial markets have undergone many changes over the past twelve months. Two notable examples of such changes have occurred in the housing market and the auto finance business and both have resulted in hardships well beyond their respective markets. The recent bankruptcy of CIT Group reflects the latest casualty of a tightening in the credit markets.
The good news that Ingram Micro wants to share with everyone that regardless of the conditions of the financial markets and the downturn of institutional lending that has begun to plague our economy, Ingram Micro has not changed our lending practices. What this means is that we have not modified our lending practices to reflect the tighter credit that exists in the market today.
The basis of being able to support your credit request are grounded on several fundamental lending practices that we adhere to as a means of marginalizing our losses and thereby controlling the cost of doing business and this, in turn, is reflected in our pricing to you.
If you have already established an account with Ingram Micro it may be that we are not current on mandatory information and your credit analyst may request the following:
1. A current set of financial statements (Balance Sheet and Income Statement) for your company and depending on the information we have on file they may also request your last year-end financial statements or tax return.
2. Additional ways to expedite your request include the following;
a. Along with the financial statements, please consider providing us with any relevant information regarding any significant occurrences and their resulting impact to the financial statement as this will help us better understand your company
b. Any pertinent information about the type of year you are having, etc
c. Information regarding your banking arrangements and credit line as applicable.
Additionally, we want you to be aware that Ingram Micro has established several alternatives to help you close opportunities beyond your existing credit line. These programs generally function on the credibility of your client and as such do require a certain degree of paper work but we will be there to explain it and help you through the process. Please feel free to ask your credit analyst about Ingram Micro’s alternative financing programs and they will be more than happy to take you through each program and help align the right program to fit each situation.
Showing posts with label credit. Show all posts
Showing posts with label credit. Show all posts
Sunday, January 31, 2010
Wednesday, October 29, 2008
This and That
Congratulations to IT Matters for their award last night at the CDN Magazine awards gala. They won the award for Best Collaborative Solution in Canada. You can read about it at http://www.stuartcrawford.com/
How about this economy in your patch? We have seen some projects held but overall no major issues yet. But I think the impact is yet to come as companies try to get financing and credit in 2009. Craig Zarley from CRN did a good article I was fortunate to participate in on the subject. You might check it out at http://www.crn.com/it-channel/211600223.
At our HTG1 meeting this week we took a block of time to talk politics. That is way outside what I normally allow in these meetings, but based on the proximity to the election and the potential impact. There was lively discussion and the main outcome was that many wished there was a "none of the above" option for many of the races that are coming. The key is to get involved and VOTE. You shouldn't complain if you aren't part of the process!
Make sure you are guarding your credit with your lendors, distributors and vendors. It is a lot easier to lose it than get it back. Pay those bills on time and guard the credit you have with diligence. I believe those with credit will have significant opportunities in 2009 to grow rapidly as others are stymied in their business.
How about this economy in your patch? We have seen some projects held but overall no major issues yet. But I think the impact is yet to come as companies try to get financing and credit in 2009. Craig Zarley from CRN did a good article I was fortunate to participate in on the subject. You might check it out at http://www.crn.com/it-channel/211600223.
At our HTG1 meeting this week we took a block of time to talk politics. That is way outside what I normally allow in these meetings, but based on the proximity to the election and the potential impact. There was lively discussion and the main outcome was that many wished there was a "none of the above" option for many of the races that are coming. The key is to get involved and VOTE. You shouldn't complain if you aren't part of the process!
Make sure you are guarding your credit with your lendors, distributors and vendors. It is a lot easier to lose it than get it back. Pay those bills on time and guard the credit you have with diligence. I believe those with credit will have significant opportunities in 2009 to grow rapidly as others are stymied in their business.
Thursday, October 16, 2008
CRN Fast Growth Awards
I have been in Chicago the last couple days at the CRN Fast Growth 100 awards. HTS was fortunate to be #24 on the list this year, up from #68 last year. We spent the day in general sessions and in executive boardrooms and to be honest, it felt a bit out of my comfort zone. The combined revenue of this group is 10.9B, and our mere 17M doesn't even move the needle in comparison to the aggregate. But it is good to rub shoulders with those who are ahead, far ahead of the place we are. And this event was filled with those kind of people.
The big discussion was definitely around the economy and credit. Growth is fueled by capital and credit and this group of companies is concerned and feeling the pinch already. The learning for me was that I need to be very diligent in managing our cash and working hard to build even more credit capacity before we need it. I need to be proactive with our distribution partner, with vendors and with our banks. I need to make sure we have relationships with leasing and financing and floor planning companies so in the event we need it, credit will be available.
I believe there will be opportunities in the next months for growth and acquisitions like we have not seen in a while. The key will be having your financial ducks in a row so you can take action while the opportunity presents itself. That means preparation and planning. Never forget that cash is king. M&A is certainly a good method to growing. Most of the companies here this week have gotten where they are through those methods. But there is much to a successful transaction and being ready when an opportunity presents itself is the first step. So use this downturn as a wakeup call to get your credit capacity in order. If you think you have enough today - ask yourself what happens if you acquire someone just like you are and need twice what you use today. I think that is a logical goal and few of us are really ready for that.
The big discussion was definitely around the economy and credit. Growth is fueled by capital and credit and this group of companies is concerned and feeling the pinch already. The learning for me was that I need to be very diligent in managing our cash and working hard to build even more credit capacity before we need it. I need to be proactive with our distribution partner, with vendors and with our banks. I need to make sure we have relationships with leasing and financing and floor planning companies so in the event we need it, credit will be available.
I believe there will be opportunities in the next months for growth and acquisitions like we have not seen in a while. The key will be having your financial ducks in a row so you can take action while the opportunity presents itself. That means preparation and planning. Never forget that cash is king. M&A is certainly a good method to growing. Most of the companies here this week have gotten where they are through those methods. But there is much to a successful transaction and being ready when an opportunity presents itself is the first step. So use this downturn as a wakeup call to get your credit capacity in order. If you think you have enough today - ask yourself what happens if you acquire someone just like you are and need twice what you use today. I think that is a logical goal and few of us are really ready for that.
Sunday, May 18, 2008
So what about credit
I had an interesting discussion with a guy I respect very much from the credit industry this week and he gave me some very powerful insight into how we should position our organizations for rough times. One of the things that just does not compute for me is how many small businesses and particular resellers just do not understand the importance of a strong credit relationship. We need to have a very deep relationship with our banker and distribution partner so we have some breathing room to grow. Way too many think credit cards are the answer - and they are the absolute worse answer to this need.
So rule #1 is to establish a banking relationship and build your credit history. Have a line of credit and use it some, making sure to make all payments on time. DO NOT pay things off way early as that does not create a credit history. Pay it when due, but not way early.
Rule #2 is to do the same with a distribution partner. Work to get a line of credit with them and pay on day 29 or 30 if you get net 30 terms. Don't pay on day 31, or day 25, pay right on time EVERY TIME.
Rule #3 is that once you have this established with your key bank and distributor, expand it to others. Get a small line of credit with another bank and also a couple other distributors. This is not in order to spread purchasing and financing but rather to build a broader credit history. Make an occasional purchase from your second and third disty partner and put a little on a credit line at a second bank. Be up front with all this with your main finance partners so they are completely in the loop.
When times get tough, you may face a shrinking credit situation at your primary lendor and disty. Having secondary relationships may be critical for you to continue normal operations in times when the economy is tough. It is too late to do it then. This has to happen when you are doing well and there is time to make it happen.
Do not even think about it if you cannot discipline yourself to pay on time EVERY time. Bad credit builds up just as much, or more so, than good credit. The last thing you want is to create a series of bad credit history postings. But if you are a good money manager, this is an area you can create a very strong competitive advantage against most of your competition as well as position yourself for success in down times. It has to be done when you can absolutely perform, but it can really put you on top when things get tough.
So rule #1 is to establish a banking relationship and build your credit history. Have a line of credit and use it some, making sure to make all payments on time. DO NOT pay things off way early as that does not create a credit history. Pay it when due, but not way early.
Rule #2 is to do the same with a distribution partner. Work to get a line of credit with them and pay on day 29 or 30 if you get net 30 terms. Don't pay on day 31, or day 25, pay right on time EVERY TIME.
Rule #3 is that once you have this established with your key bank and distributor, expand it to others. Get a small line of credit with another bank and also a couple other distributors. This is not in order to spread purchasing and financing but rather to build a broader credit history. Make an occasional purchase from your second and third disty partner and put a little on a credit line at a second bank. Be up front with all this with your main finance partners so they are completely in the loop.
When times get tough, you may face a shrinking credit situation at your primary lendor and disty. Having secondary relationships may be critical for you to continue normal operations in times when the economy is tough. It is too late to do it then. This has to happen when you are doing well and there is time to make it happen.
Do not even think about it if you cannot discipline yourself to pay on time EVERY time. Bad credit builds up just as much, or more so, than good credit. The last thing you want is to create a series of bad credit history postings. But if you are a good money manager, this is an area you can create a very strong competitive advantage against most of your competition as well as position yourself for success in down times. It has to be done when you can absolutely perform, but it can really put you on top when things get tough.
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