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.
Did you know that your customers and prospects are talking online about your company and industry, whether you are there or not? Do you know what they are saying?
It used to be that if you wanted to know what was being said about your company in public you could subscribe to a press clipping service or try to monitor all the print media yourself.
For better or worse, along comes the Internet. Now in addition to major news outlets or your industry’s trade journals, anyone with a computer connection can express their opinion about your company, good or bad, and share it with the world. In fact, entire business models have cropped up that make it easier than ever for a consumer to share what they think of your company, brand or product.
Thankfully, it’s easier than ever to follow (aka listen) what’s being said about your company and brand. The smart companies are going beyond listening and are actually engaging in conversations with their customers and prospects, often creating a relationship before they ever enter the sales funnel (To find out how your company can move from listening to the next level, make sure you read about the free webinar at the end of this post).
Here are five free tools you can use today to start listening to what’s being said online about your business:
TIP: Before setting up any of these tools, go and get a Google Reader account at www.google.com/reader. All of the tools below will allow you to use RSS feeds to combine the alerts into one location making it easy to quickly check into online conversations you want to be a part of. If you need a primer on what RSS is, there is a good explanation on Wikipedia or take the tour on Google.
- Google Alerts: Go to www.google.com/alerts and create alerts for your company name, major competitor’s names and industry references.
- BackTweets: BackTweets will search for URL’s on Twitter, such as your company website or blog. If you aren’t on Twitter and wonder if you should be, read our blog post about it here.
- Tweet Beep: Tweet Beep will monitor any phrase that you choose (like your company name) on Twitter and update you either once per day or once per hour.
- BackType: BackType focuses specifically on comments made in blog posts. Blogs, and comments in them, are increasingly becoming a place where people are discussing their experiences with companies.
- SocialMention: SocialMention takes a comprehensive look across all social media including blogs, microblogs (Twitter), bookmarks, pictures and video.
There are new resources being developed all the time to help keep track of what’s being said online about your company. Best of all, they’re free! The tools mentioned here will put you well on your way to taking the first step in participating in online conversations.
If you are interested in taking the next step and starting to turn those online conversations into actionable leads, be sure to sign up for Direct Capital’s next free webinar: Drive More Sales with Social Media coming up on October 20th.
Are there other tools that you use to monitor your company?
Photo Credit: ky_olsen
How would you build your business differently if you treated every aspect of it as a marketing opportunity?
I spent some time in Boston this past weekend and made a visit to Faneuil Hall, a marketplace set right in the middle of the city that has been around for over 250 years. Part of the marketplace is the Quincy Hall Colonnade which is a food hall packed full of almost any cuisine you can imagine.
As I walked back and forth through Quincy Hall with my son trying to decide what to eat, it reminded me of how much the experience we deliver to the customer is just as much a part of a marketing message as an advertisement, e-mail or website. Here’s why:
There are several good definitions of “marketing”. All of them right in one way or another. A favorite description of mine is that marketing is everything a company does to understand, communicate and attract potential customers. There are three businesses I saw this weekend that I believe are doing some of the right things to fit this description.
The loud pizzeria – One of the many pizza shops in Quincy Market had a bellowing cashier yelling out with his thick North End Boston accent “I can help the next customer here”. You could hear him from two or three storefronts away. To some this may have been obnoxious but this communication style was attracting a line of hungry customers in a line 4 deep for a slice. Was their something about the loud intrusive manner that attracted hungry customers looking for America’s favorite food?
The quiet Thai place – A nearby Thai restaurant by contrast had no loud voices coming from behind the counter but instead had patient employees waiting to help and a sign offering free samples next to a tray of toothpicks. The strong smell of curry and the clear glass front where you could see their offerings was too much for me to resist. The menu had some a la carte choices in addition to a “Create Your Own Buffet” option that let the customer choose 2, 3 or 4 items from their menu. Was this the perfect solution for the sensory overload you experience in this environment that can be the perfect choice to get a little of everything?
The Irish pub – This establishment had dark mahogany bar and wood paneling, a Guinness mirror behind the bar and all the traditional Irish drafts on tap. As you crossed the threshold you felt like you were walking into a pub in the middle of Dublin. You could hear the sound of Irish music above the white noise hum of the talkative patrons. As one of the few sit down establishments in the crazy Quincy Market environment, was this business looking to create the cozy pub feeling to escape the mayhem?
All three of these businesses project a very different first impression to the customer yet all of them were just as busy as the next. Even though all three examples are in the restaurant space, there is a lesson here for any business – no detail is too small if it affects the experience your customers have.
Think about that.
Have you done everything you can to optimize the customer experience through the price of your product, the colors in your logo, the process your sales team uses, the advertising you do, the way the receptionist answers the phone? All of these (and more!) contribute to the message you send to potential customers about what kind of experience they can expect from your business.
A main stream example of this that almost all of us have experienced is Disney World. It is regularly referenced as using the cleanliness of their parks as a marketing tool. This is one of many things that Disney does to immerse you in an experience that transports you from your normal reality.
So I ask again, how would you build your business differently if you treated every aspect of your business as a marketing opportunity?
Photo Credit: thewastedsmile
We recently put out a call to business owners via this blog, LinkedIn and Twitter to share their biggest business frustration. Some of the results were surprising, others not so much, but all are very real issues that businesses face every day.
We’ll cover some of the responses during our upcoming free webinars and others we’ll discuss here to get input from you.
One item near the top of the list is finding and keeping outstanding employees.
Business owners have an obvious vested interest in their operations. They are typically willing to put in the extra hours and give the extra effort needed to be successful. After all, if the business is successful the owner realizes those results directly. The business owner is so invested, that it may be unrealistic to think that any employee will be as motivated as the business owner. Or is it? Maybe you’ve been lucky enough to experience the employee who is as excited about the future of your business as you are. How do you find and keep those employees? Here are a few suggestions:
- Share your vision – Having been both a business owner and an employee myself, I’ll say with confidence that while money does factor into someone’s employment decision, finding a business that’s inspiring to work for with congruent values to the employee can be just as (or more!) important. Here’s an idea to find someone inspired by your business – change up the typical interview questions and share your story. Share what makes you passionate about your product and business. Share how the business got started and your vision of where it is going. Those who connect with that vision are more likely to go the extra mile – probably without being asked.
- “A stake in the outcome” – Jack Stack wrote a book with this title that discusses how he and 12 other employees bought the company they worked. The basic premise behind the book is that employees who are working toward a common goal are likely to put forth their best effort. A solid concept that is applicable in virtually any setting. Whether you go to the extreme that Jack discusses in the book and open up your books to employees or just share progress towards company goals with employees, you will find that people are naturally motivated when they are invested and have a clear line of sight on the end game.
- Give up control – If you are like most business owners then you are a control freak. One of my biggest challenges as a business owner was giving up control. But, I quickly learned that a motivated employee who is invested in the process will do a better job than I could because of their first hand perspective on the work.
What other ways do you find and keep quality employees?
