Liquidity crunch? The market is looking up

Tuesday, February 1, 2005

I’m happy to say that the availability of financing to the security industry, and more specifically for alarm company owners, appears to finally be looking up.

For several years now I’ve talked with numerous lenders in our market and the owners of security companies who have shared with me the struggles they’ve faced. We’ve talked about the liquidity problem, the limited number of specialty lenders, the lack of understanding by traditional banks about this market and the shrinking number of dealer funding programs that are out there.

But times are changing, and although it won’t happen overnight, the market is beginning to see the light at the end of the tunnel in more ways than one.

Sure, it’s not a cakewalk when it comes to securing financing for one’s business. Nearly everyday I hear about the obstacles both lenders and those looking for financing must clear from my husband, who works in the financing industry. There’s the gathering of financial information, the submitting of paperwork, and the decision on what type of financing is best suited for a company to pursue. And after everything has been assembled, there’s the waiting game to hear if a financial institution will loan you any money and then what the financing terms will be.

Though the number of those lending to security companies has shrunk in several ways, either from companies exiting the market altogether, no longer writing loans or through consolidation, there certainly is more interest. And, some companies are willing to look outside the box, either pursuing funding by going public or by working with a venture capital firm.

In talking with many of you in the security industry, it was also great to hear that the stigma associated with dealer programs, and selling accounts, is beginning to change. Unfortunately, dealer programs have gotten a bad rap for numerous reasons, either from concerns that it promotes low-down, no-down alarm companies or that it requires companies to participate in a never ending cycle of needing to sell so many accounts a month to stay afloat.

But take another look. There are dealer programs out there that do not breed mass marketers or create a financial pitfall. Why not look at the opportunity of selling 50 or 100 accounts from time to time as a way to raise capital, and as a solid business strategy?

Either way you look at it, most companies today need capital at one point or another. Not everyone is able to write a check to pay for a new installation van, security equipment for a large project or a new facility.

Having a solid financial plan as the capital market begins to look up makes for a sound business. It's time to get yours into shape.