Room to grow
Busardo added that the advantages are as soon as the customer accepts the loan. "They have an open line of credit and can do upgrades and add-ons easily, extending the term or increasing the amount of their monthly payment. This is a tremendous feather in the cap of PSA and the integrators to be able to offer a program of this magnitude."
Project Financing can include equipment, labor, warranties, maintenance and even monitoring. End-users simply make one monthly payment for all related services. "It's a true finance that allows customers to pre-pay with no penalty after one year. Security integrators have always struggled with cash flow and project sticker shock. This program not only gives the end-user flexibility but provides the integrator the ability to continue the business relationship," Busardo said.
"Our role is to work with PSA's system integrators and customers to find the best solution for them," said Donna Wesemann, CLP, vice president of Sales, Susquehanna Commercial Finance, Pottstown, Pa. "We have a fine focus on the needs of the construction community and knowledge of the industry. Project Financing gives integrators a specialty finance program and sales tools to help sell equipment. The opportunity is a snowball rolling downhill. They can bring in new customers and then keep repeating business with those accounts. The payment is pulled into one neat package--equipment, monitoring and maintenance and gives them a new way to sell equipment and services. It's a home run all around," Wesemann added.
The bottom line
The key to any financial service program is the ability to generate additional recurring monthly revenue, according to Paul Sargenti, president and CEO of SAFE (Security Alarm Financing Enterprises) Security, San Ramon, Calif..
"With a solid RMR model, there is a fairly dependable cadre of senior lenders to the industry," said Sargenti. "Although the business continues to be robust, the lending tends to be more cautious. The credit and banking meltdown have resulted in a much more conservative lending environment and new regulations," he said.
Sargenti said dealers in the SAFE program sell the accounts but retain an economic interesting by keeping the service contract. In addition, when a customer account goes into renewal, the systems integrator receives a bonus component.
"SAFE Security changed in 2004 to a more hybrid operating model. We believed we could serve our customers best by really controlling the customer experience. Before that it was much more transparent. We are out in front of our customers today. We do dispatching and scheduling and monitoring. We have a network of 265 dealers nationwide who are partners, but we still control the customer experience. We schedule all the upgrades and add-ons."
Despite the news accounts about the depressed economy, Sargenti said it's no time for the integrator to be timid about their business. "Get organized, talk to lenders and explain the business. If you don't succeed the first time, don't give up. There is liquidity in the marketplace for those who can explain their business and how they intend to make it grow," he said.
DRESS FOR SUCCESS WITH RMR
Looking at the landscape of lending, R. Anthony "Tony" Smith, president of private investment banking firm Security Finance Associates Inc., Pasadena, Calif., said a fair amount of creditors are currently loaning against acquisitions and growth. He said he hasn't seen new banks and entities coming into the industry, only because it requires background knowledge of the industry, which most don't have. However, "the mergers and acquisitions business is quite fluid lately and the multiples of monthly recurring revenue are actually higher than what the industry has historically seen," Smith commented.
Other financing techniques, such as leasing and dealer programs remain active, according to Smith. "Leasing is still a small percentage and is generally done on a 'one-off' basis. The dealer programs are growing dramatically. They provide financial and marketing tools for smaller companies."