Quick on the heels of our partnership announcement with Edible Arrangements, we are excited to announced that Direct Capital Corp. has been selected to be the preferred financing provider for BuyDentalEquipment.com, a leading nationwide provider of high quality refurbished dental equipment.
“We are excited to partner with BuyDentalEquipment.com to provide its customers with a stable and flexible finance program,” said Paul Ringuette, Vice President of Sales. “Small businesses, including dentists, are struggling to access financing and we look forward to alleviating that pain through a robust offering delivered together with a leading equipment supplier. With our recent securitization of $200 million in lending capacity, Direct Capital stands ready to help BuyDentalEquipment.com accelerate its strategic growth plans in the market.”
“Direct Capital is the perfect match for our company to provide strategic financing options that match our customers’ specific goals,” said BuyDentalEquipment’s VP of Sales Tony Brumley. “We are confident that our partnership will make the financing process as quick and efficient as possible for our customers, so they can spend more time running and growing their business.”
“Now is a great time to consider purchasing refurbished dental equipment from BuyDentalEquipment.com,” said Brumley. “We provide dental professionals with an affordable alternative to high priced dental equipment.” “Our refurbishing process is so thorough that rebuilding may be a more accurate term for what we do.
Watch a video that explains BuyDentalEquipment.com’s refurbishing process here.
Webinar: A Beginner’s Guide to Section 179
This Webinar will cover the who, what, where, when and why of Section 179. Don’t miss out on this IRS deduction that could save you thousands.
The Current Business Financing Marketplace
Today’s credit marketplace makes it absolutely imperative that business owners take pro-active steps prior to submitting an application for financing. If you have been through the process of asking for business financing, you’ve probably experienced that helpless feeling of not really knowing what the outcome will be, even if you are the perfect borrower, until the very end of the process. In today’s credit market, even the near perfect borrower is floundering their way through the lending process. We’ve found it more important than ever for business owners take action to set themselves up in the best possible light to an underwriter before applying for that equipment financing, business loan, or any kind of business financing.
The Three C’s, or is it Four or Five?
A major challenge that business owners have is not knowing exactly what to do to look good in the underwriter’s eyes. Many business owners will base their actions on past experience with their bank, however, in most cases the bank doesn’t fill you in on why you were denied financing, or why you are getting the rate you were given. You may have heard of the three C’s of underwriting: Credit, Capacity and Collateral, which is a common explanation of the criteria used to underwrite financing requests (though some underwriters say they use four C’s and five C’s). This doesn’t provide any guidance on how to position yourself and your business for financing.
Four Must-Do Steps Before Seeking Business Financing
- Start with the end in mind: Ask yourself what will be the return on your investment – does the money saved or additional revenue from the investment outweigh the cost? Make sure you measure all applicable factors. Besides the direct revenue increase or cost savings there may be indirect factors that may affect the net cost of the investment. One important savings to make sure you know about is Section 179. We’ve prepared a website to answer all of your questions in this area at Section179.info.
- Review your personal credit: Your personal credit score factors into almost every financial transaction made. Some you may know about (business financing, auto financing, mortgages) but others you may not (car insurance, employment, property rental decisions). There are three major credit bureaus (Experian, Equifax and Transunion) – check each one to insure everything on your personal credit is accurate if your scores aren’t where they need to be.
- Review your business credit: The primary business credit reporting organization is Dun & Bradstreet (though Experian and Equifax also have business credit reports). For business loans and equipment leasing, this source is used frequently. The first step is to make sure you have a listing with Dun & Bradstreet - some newer and smaller businesses aren’t registered with Dun & Bradstreet at all. Once a business is registered, Dun & Bradstreet collects information such as year started, revenues, SIC code and a Paydex Score (a system developed by Dun & Bradstreet). Inaccurate information with this source can hinder business financing efforts.
- Understand the market: To help understand what you’ve learned from your business and personal credit reports, review our past webinar -”Insider’s Guide to Personal and Business Credit”. Also, understanding the borrowing activity in your industry and your region can not only help you understand the current financing landscape, but it also empowers you to adjust and target your customer base as you begin to understand trends in your area month over month.
Webinar: A Beginner’s Guide to Section 179
This Webinar will cover the who, what, where, when and why of Section 179. Don’t miss out on this IRS deduction that could save you thousands.
Dun & Bradstreet recently published its U.S Business Trends Report for October 2009 (which is an update to their June 2009 report found here) and like much of the financial news coming out recently, there is both good and bad news. The report comes to three main conclusions and I’ve included explanation and commentary for each one:
- The total number of business failures exceeded 95,000 in June 2009 which is more than double the number of bankruptcies reported by the U.S. Government.
- The reason for the discrepancy as described by D & B is that there are businesses that fail without ever going through the bankruptcy system and, as a result, don’t get recorded by U.S. government statistics. D & B uses indicators such as non-responses by businesses to their inquiries following a history of late and delinquent payments to their suppliers
- While the discrepancy is shocking at first, at the end of the day this should come as no surprise. Common sense tells most of us that not every business that closes goes through bankruptcy.
- The number of bankruptcies reported by the U.S. Government increased by 50% from June 2008 to June 2009. In contrast, the number of business failures increased by 36% – certainly a trend in the right direction. The actionable information comes when looking at the detail.
Source D & B US Business Trends Report - October 2009
- Overall business failures have improved in the past year but there are still industries that remain behind the U.S. Averages including transportation, construction and business services.
- With major spikes in fuel and energy costs over the past 2 years and the well documented real estate struggles, it’s probably no surprise that lagging industries include transportation and construction.
- Looking at the other end of the spectrum, what opportunities are there for your business with healthier industry segments? In June 2009, Health Services and Natural Resources topped the list with the lowest failure rates. Are there verticals in these industries that your business could focus on?
- For the most stable part of the country you’ll need to head to the rural states of North Dakota, Wyoming and Iowa – these states had the lowest failure rates in June 2009. According to D & B, the reason for the lowest failure rates in these areas is the stable presence of agricultural industries. States with the highest failure rates include Tennessee, Nevada, California (it’s worth noting that both Tennessee and Nevada also had the highest failure rates in June 2008).
Source: D & B US Business Trends Report - October 2009
- D & B (which tracks payment history for millions of businesses) saw a decrease in delinquency rates in Q2 which is considered a leading indicator of bankruptcy rates.
- This is certainly good news for a lot of businesses. We speak to thousands of businesses every day and collections is a major issue for virtually all businesses.
- Industries that were still hard hit by delinquency rates in June 2009 are manufacturing, wholesale and retail. According to D & B’s analysis, the manufacturing and retail sectors continue to be affected by decreased consumer spending while wholesale firms are more susceptible to cash flow issues given the inherent nature of their position as an intermediary. Business services and natural resources had the lowest delinquency rates in June 2009.
- If your business is affected by cash flow issues, we recently did a free Webinar on collections best practices that is worth your review. There are also short-term cash flow solutions that can help bridge the gap in your collections cycle.
Share your experiences with us- are Dun & Bradstreet’s findings congruent with your market?
What’s your reaction to the CIT Bankruptcy?
As I read some of the hundreds of stories about the CIT bankruptcy, I’m reminded that the media has a tendency to “enhance” stories to gain readership. There is certainly no doubt that the credit markets have been significantly altered from the economic turbulence of the past couple of years. The media typically looks through a big picture lens, which has its place, but what you really want to know is how will this affect your business?
So let’s break the situation down into more useful chunks.
The troubles with CIT are not new to the public nor are they new to CIT.
According to the Boston Globe and CIT’s most recent quarterly earnings report, in order to preserve cash the company’s originations dropped from $11.3 billion in the first half of 2008 to $4.4 billion in the first half of 2009. Some portion of this decline was due to a decrease in demand for financing, however, the balance of that difference was funded by someone else. What does this mean? This should tell you that while there is less capital available from some sources, other sources have money to lend and the continuing demand for capital from small businesses is creating new and innovative products from lenders to meet that demand.
The continuing loss of credit sources is a trend that should put every business owner on notice.
If the seemingly constant news about bank failures, or the pull back on business credit cards hasn’t tipped you off, let the bankruptcy of CIT spur some action. What does this mean? I recently wrote about this business credit perfect storm and CIT’s bankruptcy is further evidence that the ability to finance your business cannot be taken for granted no matter what your financial picture. Even if you do not need access to capital today, someday you will and that means positioning your business now.
What about the financing programs for my customers?
The media focus so far seems to have been on CIT’s direct small business customers. However, they also had a significant vendor financing program which has left those vendors wondering what’s next. What does this mean? I would argue the points made above also apply to them. Overall, the decline in CIT’s originations whether directly to the end user or through a vendor, have been picked up by other sources. Just like a business owner should have multiple sources of capital available to them, vendors should consider having multiple sources of vendor financing set up.
What’s the bottom line?
The CIT bankruptcy, bank closings, reduced and closed credit lines – all of these circumstances are just further evidence that every business needs multiple sources of capital and to preserve cash if they want to best position themselves to take advantage of the opportunities recessions offer and be prepared for when the recession ends.
Has your business done anything differently since the announcement of the CIT bankruptcy?
Photo Credit: digiart2001
I recently interviewed Shawn Arnone, Direct Capital’s Vice President of Business Development. Shawn identifies and implements vendor financing programs with national manufacturers, dealers and resellers of equipment. He also seeks out strategic portfolio opportunities.
Shawn has nearly 20 years of experience in financial services, including more than 15 years in the equipment finance industry. He has filled senior vice president roles at US Express Leasing and CIT, served as a vice president for Key Equipment Finance, and in sales and management positions at Citicapital, Copelco Capital, and Canon Financial Services.
Shawn’s background and current role give him a unique perspective on the national equipment and small business financing landscape that he shares with us below:
Business owners have been experiencing significant problems in accessing capital for the past couple of years. Do you feel that we’re on the rebound yet?
SA: We are definitely starting the rebound but people are very cautious. Banks and lending institutions want to lend but they just can’t pull the trigger. They are so caught up with trying to stabilize their company, shore up their balance sheets, retain talent and adhere to the government restrictions placed on them (if they participated in any of the bailout programs), that lending is the furthest thing from their everyday operations. While this is not a good thing for the economy, it creates a huge opportunity for companies such as Direct Capital that not only have capital to lend, but are also willing to issue approvals and get that money in the hands of small business.
What are the biggest frustrations you’re seeing from the clients you work with?
SA: The clients looking to implement a financing program for their customers are most frustrated with actually closing a deal. Things that used to top the priority list, such as rates, residual values and the availability of “app only financing” aren’t as important. The partners we work with are interested in a company that can underwrite a deal and then actually fund it! More and more approvals, from top-tier national funding sources, are being pulled back or canceled without notice again creating a huge opportunities for financing companies that can execute on those approvals.
What industries do you seeing moving the quickest out of the recession?
SA: I’m seeing the most activity in the Technology vertical. Regardless of the economy, companies realize that they cannot put off technology upgrades and refreshes. It’s clear that they have to be prepared for when the economy turns. If they’re not and their competition is, the revenue loss could be disastrous. Also, any vertical that has a medical or health care component to it is definitely far ahead and along in the recovery process.
What areas of the country are showing the most strength?
SA: The Northeast and West Coast (California) seem to be coming out of this quicker than other regions. But, recovery anywhere can be a good thing. As long as small business owners and consumers see light at the end of the tunnel, no matter where that light is for now, it can spur confidence in other parts of the country which can lead to a more widespread recovery.
You recently attended the Equipment Leasing and Finance Association ELFA) Annual Conference. What are your biggest takeaways that will impact business financing in the coming months?
SA: Our industry has been through its most challenging period since the ELFA was first formed (45+ years ago). As a result of consolidation, mergers and liquidations, many financing companies are now gone. But, through all this, there are companies that remain strong and continue to lend where it makes sense helping business’ grow. Direct Capital has been smart through the tough times and is grateful to be one of those companies helping small business owners take advantage of the opportunities created by the current economy.
That being said, financing companies will continue to fall through 2010 (especially small local / regional banks), credit will remain tight for at least another 2 or 3 quarters and until the housing market stabilizes and rebounds (predicted by early 2011) the road will remain bumpy. That’s all the gloom.
The bright side, banks are starting to see more and more deposit activity giving them a lower cost of funds. Independent finance companies, like Direct Capital, who managed well through this storm, are poised to help small business owners out there now who must acquire equipment. And, this whole downturn made lending institutions realize that they will need to price appropriately to account for credit and equipment risk while eliminating the urge to acquire business, at any cost, for the sake of volume.
If you are even considering buying equipment for your business in the next several months, you have to factor in the Section 179 deductions available to you or you could miss out on major tax savings.
Here’s is what you need to know in a nutshell:
- Section 179 refers to the internal revenue service tax code that allows a business to take a current year deduction of up to $250,000.
- The Economic Stimulus Act of 2008 doubled the deduction limit from $125,000 to $250,000 and the American Recovery and Reinvestment Act of 2009 extended this deduction into 2009.
- Qualifying equipment must be in place before December 31, 2009 to claim the deduction this year.
Consider this example:
Equipment cost: $30,000
Total first year deduction: $30,000
Cash savings on your equipment purchase*: $10,500
Cost of new equipment after tax savings: $19,500
*Assuming a 35% tax bracket
Direct Capital has developed a free resource to answer your questions at Section179.info, including the ability to calculate your estimated tax savings. There you can read all the details you need to know to take advantage of this potentially huge deduction.
In addition, we’ll be hosting a free webinar on November 17th. Once the details are set you can hear about them first by subscribing to this blog or following us on Twitter.
Direct Capital is excited to now be Edible Arraignments® exclusive preferred financing company! The full text of the press release is below:
Edible Arrangements®, the pioneer and leader in hand-sculpted, fresh fruit arrangements, has selected Direct Capital®, a national direct lender, as the exclusive preferred finance company for the brand. The expanded lending program was developed in response to capital needs to support growth initiatives in 2010 and beyond, and will be used for single and multi-unit development of new stores, store remodels and equipment purchases.
This announcement comes on the heels of Direct Capital’s expansion of their franchise lending unit after securing $100 million from Key National Finance and other conduits and banks in April, and renewing an additional $100 million line from DZ Bank. They have been one of the few, if not the only, specialty finance companies over the last 9 months to secure new capital.
“During a time when it is difficult for franchisees to obtain financing, we’ve expanded our franchise division to better support the industry and help successful brands, like Edible Arrangements®, continue to grow,” said Robyn Gault, Direct Capital’s Director of Strategic Accounts. “The retreat of many lenders from the market has left franchisees with limited options and has driven forward thinking franchisors like EAI to secure relationships that will keep capital flowing through their systems.”
Currently, Edible Arrangements has 929 locations with the goal to reach 1,000 units by 2010. Most recently, the company announced the launch of its new “core and station” store enterprise development program and the company’s evolution into multi-unit franchising. A central component of the new strategy is Frutation by Edible Arrangements, a grab-and-go concept offering customers fresh-fruit smoothies and juices, fruit and green salads, dipped fruit and a variety of other fresh-fruit products.
The Direct Capital program in conjunction with Farid Capital, a secondary source set up by Tariq and Kamran Farid, to provide finance options to franchisees who do not meet the underwriting criteria of the DCC program, will help fuel franchise growth by new and existing franchisees. “During a recession it’s crucial for franchisees to have access to capital to grow. We are excited to work with Direct Capital to help our brand expand and prosper during these tough economic times,” said Tariq Farid, CEO and Founder, Edible Arrangements, Inc. “We are committed to increasing our footprint into new and existing markets around the world. The combination of this partnership and the launch of Farid Capital Corporation are key ingredients to developing the brand across the globe.”
Tariq Farid, recently the recipient of two Entrepreneur of the Year awards from the International Franchise Association and Ernst & Young in Metro New York, developed and launched Edible Arrangements in 1999 in East Haven, CT, after many years in the floral industry. He learned early that corporate support can make the difference between a struggling or thriving franchise. It is for this reason that Edible Arrangements offers its franchisees comprehensive corporate and onsite level training, unparalleled technology, national brand recognition, extensive support and now, financing.
Today’s post started with a question I asked of our CEO, James Broom. The question was how he would describe the current lending landscape for small business? Being a business owner himself, Jim has a unique and inside view on the capital markets and how they are affecting the country’s small and medium size business.
Unprecedented Times
This is the most difficult time in many decades to access capital and financing. Difficult may be too soft a term to describe the current situation – the financial structure that capital flows through has been permanently altered.
The Reservoir Went Dry
Think of a reservoir that has always supplied water to a particular area. Then one day an earthquake cracks the earth’s crust just below the surface and just like that the whole thing dries up. What would happen?
The people “in charge” act quickly and find a new saltwater source nearby. Finding this water is great, however, it has to be processed differently than the prior water supply. The saltwater source needs to flow through new channels while sections of the prior grid are eliminated. The banking system is broken but we’ve figured out the new distribution system to both access and deploy capital to the small business community.
Thankfully, American ingenuity and the entrepreneurial spirit have spurred new products and forms of capital that are making their way into the market. What today’s business owner needs to do is figure out is where to look for it and how he/she needs to position him/herself to access it.
The Money Is Out There
While capital costs are higher and there is not as much as before, there is money out there. There are trillions of dollars on the sidelines waiting to be deployed. People need to be more careful when they go looking for financing and be smart in how they use it. Also, if a business hasn’t applied for a loan or working capital in the last 18 months, they need to have different expectations.
One of our goals at Direct Capital is to be your financial advocate. Let us know how we can help. If you have questions about how to access capital or position yourself to get this capital for your business, feel free to contact our Finance Managers for some guidance or ask your question in the comment section below.
Photo Credit: _es
Free Webinar: Drive More Sales With Social Media – A Starter Guide for Small Business
Your customers are online talking about your company whether you are there or not. Learn a step by step process to find out what they are saying and how to boost your revenue by taking part in the conversation.
This webinar will cover:
- What is “social media” and why you should care how this medium is affecting the way you do business.
- How to find out what your customers and prospects are saying online about your company (for free!)
- How you can use social media to increase sales. Plus, improve public relations, customer service and brand perception.
- How to you navigate the social media landscape and pick the best tools to establish your online presence.
- And much more!
We are excited to announce a new lease financing facility to help better serve the small business community! Read the details below:
Direct Capital Corporation announced today that it has closed a new three-year $50 million equipment lease-backed bank facility with the Lender Finance division of Wells Fargo Foothill, part of Wells Fargo & Company (NYSE:WFC).
This is the second financing program closed in the last six months by Direct Capital, a leading nationwide provider of financial services, including commercial equipment financing and business loans. These two programs followed a January announcement of the extension of an existing $100 million facility.
“Wells Fargo Foothill is a knowledgeable and experienced financial partner,” said Christopher Broom, Chairman of Direct Capital. “We are pleased to welcome them to Direct Capital.”
With the addition of the Wells Fargo Foothill facility, Direct Capital has significantly strengthened its ability to help businesses nationwide access capital. “There continues to be a major void out there for companies that are seeking to access capital,” said Paul Ringuette, Direct Capital’s Vice President of Sales . “We are attacking this issue every day by reaching out to companies and letting them know we are here for them. With this added funding capacity, this message will only become louder.”
“We are pleased to have completed this financing for Direct Capital Corporation, an industry leader in small ticket equipment leasing,” said Andrea Petro, Executive Vice President and Division Manager of Wells Fargo Foothill Lender Finance. “We look forward to supporting the company’s senior management team in its plans for ongoing success.”
Direct Capital was recently recognized as the 6th largest independent leasing and finance company in the United States by the leasing industry trade magazine, The Monitor.
For more information about Direct Capital, call 800-999-9942 or visit www.directcapital.com.
