Special Series: Securing Equity Capital Part ThreeDecember 18th, 2013 | Category: Industry News
In Window Film magazine’s third installment in a series regarding securing equity capital, today Mike Collins, partner at Building Industry Partners, explains how window film dealers can prepare for conversations with potential lenders.
Collins says that the secret to a good lending relationship is to be the source of good news and to return the bank’s capital to them over time.
Window film companies may want to look to a fully integrated enterprise resource planning system, essentially total-business software, which takes companies from order entry to fulfillment to accounting, he advises. This also offers the ability to prepare a host of financial analyses quickly.
“Today’s window film companies should be using a software program that is built around a single order entry record which automatically tracks and produces performance and financial information based on the workflow process,” says Joanne Schultz, president of TintPro. “This allows current and accurate information to be produced instantly, and without additional cost.”
Schultz says, “The types of reports that should be generated are:
- Sales analysis—which provides a breakdown of size and types of jobs, (residential, commercial flat glass);
- Sales by item analysis—containing a breakdown of sales, cost of goods, cost of labor and profit margins;
- Lead source analysis—tracking the effectiveness of marketing and advertising campaigns allowing you to tailor your budget to marketing that is working. It also eliminates wasted money on ineffective ads and to build on successful efforts; and
- Inventory report—automated inventory tracking allows reports of the value of your stock (business), to be produced instantly. Because it is tracked in real time, there is no need to order and store large amounts which is efficient and is a cost savings tool. Theft is controlled if not eliminated.”
She notes that, “These reports allow lending institutions to evaluate your company’s value, performance and profitability and also gives them a foundation to predict expected outcomes based on sound financial data.”
“If a company comes close to violating a loan covenant with the bank, this ability to provide timely information becomes even more critical,” adds Collins.
When preparing an introductory packet for a bank, he lists some additional critical items that must be included.
- Financial projections (prepared at an 80 percent confidence interval);
- Full historical financial results (balance sheet, cash flow statement, accounts payable and receivable aging reports, etc.);
- Business overview and history;
- Detailed description of products and product categories;
- Description of and trends driving demand in the market served;
- Strategies for growth (current and to be implemented);
- Three to five key differentiators versus competition;
- Customer longevity; and
- Customer diversification (no large make-or-break customers).
Other key areas to cover include the following:
- Description of the sales process and cash-collection cycle;
- Types of customers served;
- Geographic area served;
- Biographies of the management team;
- Corporate ownership and structure; and
- Competition (too many capital seekers try to position themselves as not having any or very much competition).
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