Key Steps To Improving Your Collections Process: Podcast Episode 6
The most important part of the sales cycle is getting paid.If your company is not being paid for the product or service you are providing, you’re losing money on the work.
In this episode of Capital Conversations we take a look at how to make the collections process easier, how to overcome obstacles, and how to anticipate collection issues and recognize red flags to avoid problems in the first place.
Join us for a chat with Candi Pavliscak, the Chief Credit Officer here at Hennessey Capital, to get the inside track on what you need to do as a business to ensure full and timely payment..
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Ditching the ‘Alternative Lending’ Moniker
by: Mike Semanco
As recently as March of this year, I was using the term alternative lending to describe our industry niche - but no more. Moving forward, “alternative” will be removed from our sales, marketing and conversational lexicon. The word alternative generally connotes, outside of the mainstream, not as acceptable as the standard, a secondary when the best option is not available. In an economy of unprecedented credit stress, the asset based lending/factoring industry has earned the legitimacy to take its rightful place as a niche financial lender - not an alternative lender.
Factoring and asset-based lending are time-tested options for small businesses and remain a vital form of commercial lending after 500 years because they have the ability to sustain and grow a company when traditional bank financing does not fit or, in today’s economy, becomes unavailable. Indeed, rather than being an alternative financial option, our industry has shown leadership in many metropolitan credit markets. So, it is safe to say, that in this unprecedented economic climate, what once was considered “alternative” is now mainstream.
Frustrated entrepreneurs and other traditional bank borrowers stymied in their efforts to obtain working capital are welcoming the opportunity to obtain financing through factoring and asset-based lending, finding it to be a credible and a solution-based approach. Our industry has been given a unique opportunity to help small businesses continue to grow and expand despite the more traditional road blocks that stand in their way. They know that it is sometimes not the cost of financing (within reason) but the availability of financing that can make or break a company. As an industry, we need to acknowledge the mainstream role that commercial finance is increasingly playing in small and medium-sized business markets. The lender of last resort reputation can safely and permanently be laid to rest. The ongoing recession has created increased interest within the entrepreneurial community regarding factoring and asset-based lending. As an industry, we should embrace this increased interest and use it as an educational opportunity to remind small business owners that “alternative lending” isn’t so “alternative” any more. Niche financing, like factoring and asset-based lending services will not only help sustain many businesses during a dicey economic outlook, but will be a critical business growth tool long after the current recession ends.
There are no definitive answers as to how long it will be before we see traditional lending back in full force. Despite my faith in the commercial finance industry there is no doubt that it will be for the good of the business world if we resume normal lending patterns soon. In the meantime, commerce must keep moving forward if we are to prevent the collapse of business as we know it - and the niche commercial finance sector is taking up the mantle. There’s no alternative but to celebrate such industry leadership.
4 Things Small Business Investors Are Looking For
Whether you are already in business and searching for additional capital and/or a new finance parter, or you are considering embarking on a new entrepreneurial adventure, there are some key criteria investors will consider:
- A business plan that describes the market opportunity. The value the the business will deliver and its acceptance in the marketplace must be clear. In short, there must be a compelling reason the business exists. NOTE: An executive summary is key. Most investors do not want to see, nor will they take the time to review a 50-page marketing plan.
- A capable entrepreneur. Since their money will be in your hands, the entrepreneur must convince the investor/lender of his or her competence, commitment and integrty. You are the business.
- A realistic financial plan. You need to know how much capital you will need, when you will need it and how it will be deployed in executing the business plan. Sure, $1 million sounds great to any business owner, but is that really your cash need and how to plan to use it?
- An exit strategy. How and when will the investors get their money back and what is the expected return on their investment?
Southeast Michigan Has a Lot Going
It is easy amidst headlines of climbing unemployment and bankruptcies abound in Detroit to become disgruntled, frustrated and just plain depressed about the current economic climate and the region’s future. If that is how you feel, you should have been among the 400 individuals that gathered along Detroit’s picturesque riverfront to celebrate the accomplishments of some of Michigan’s most outstanding businesses in technology, professional services and more. The Automation Alley Awards Gala was an fantastic event dedicated to celebrating all of the great things happening in Southeast Michigan - and what prudent time to celebrate. Hennessey Capital was honored to be among those honored. We salute all of the small and medium sized businesses that are making a difference everyday in our region. View the complete list of winners
Hiring Opportunities in Tumultuous Times
The economic crisis has created tremendous opportunities for companies looking to expand their teams. In the commercial finance industry the retrenchment of many firms has created a large talent pool of professionals with impressive credentials and histories of success who are now available to finance organizations in growth mode. Toby Dahm shares his thoughts on this topic in the September edition of The Secured Lender. Read the article
So your customer needs a rush order?
There are a variety of red flags that can signal a potential problem with payment and/or collections from your customer. Beware: repeated rush order requests is one of those red flags. A sudden need for a “rush order” from your client might signal cash flow issues on their end. This might indicate that your customer has not planned accordingly for work flow. It could also mean they are short on cash and need to expedite delivery of a good or service, to speed up their payment and resolve a cash bind. If an unexpected “rush order” request is made, don’t be afraid to ask questions of your customer, including why the rush order is needed. You may also want to ask “What happened during the production cycle to cause this sudden need?” “Do you anticipate additional rush orders in the future and why?” The answers to these questions may signal there are troubles ahead. Keep in mind a one-time request doesn’t necessarily indicate a problem, but if you receive repeated requests from the same customer, you might want to think twice.
Leveraging Your Network - Capital Conversations Episode 5
One of every businesses’ strongest assets is their network! Whether it’s professionals like CPAs or Attorneys, or your the fellow assistant coach on your kid’s baseball team, your network is an invaluable business tool and should be nurtured, especially in challenging times.
Mike shares his tips on success in networking, from what kinds of events to attend to social networking online. Take a listen, and leave your tips and feedback in the comments!
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4 Months and Still Going…
Multiple media outlets reported of the consistent 4-month uptick in SBA lending. Better yet, all signs indicate that this type of lending will continue to increase through the remainder of 2009. “I think it’s a continuation of the impact of raising the percentage that we guaranteed to 90 percent and the elimination of the fees to the borrower,” said Richard Temkin, U.S. Small Business Administration District Director. “And the banks’ credit requirements perhaps are loosening somewhat, though that seems to be a slow process.”
So, what does this mean for small businesses? This is an encouraging trend that hints that credit markets are starting to thaw from the deep freeze of early 2009 and that banks are increasing lending. For entrepreneurs who have been struggling for the past year, this is good news. Those who are fortunate to still have a traditional bank loan are more likely to keep it. Those of you thinking about starting a business and considering a SBA loan, might just be in luck. Overall, this is a positive sign that Michigan may have hung the “open for business” sign back outside its window.
Macomb Incubator Promises Progress for Small Businesses
The new site of entrepreneurship for Macomb County was unveiled on Monday in Sterling Heights and what a sight it was. After interacting with many of the 400+ business owners, professional service providers and dignitaries, it was clear that entrepreneurship in Macomb County is alive and kicking. At a time when negative press is running wild, it was great to see so many folks energized about what the future has in store for our region. Business owners were excited about being able to leverage the Incubators talent in the areas of sales introductions, marketing, finance, business coaching and business planning. It will be a valuable resource in moving entrepreneurship forward. Learn more about the Incubator
Confidence in Michigan: It Still Exists
Mike Semanco, President & COO of Hennessey Capital, is featured as the guest blogger on Michigan Positive today. Michigan Positive is dedicated sharing positive local news. Read the blog
