Lester Thornton started Lester’s Security Plus on a shoestring budget in 2015 initially financed with a $20,000 Home Equity Line of Credit (HELOC). Lester’s Security Plus primarily provides guards for local gated communities in the St. Louis County area and has gained a good reputation among the real estate management companies as more and more communities are seeking security for it’s residents.
Last year, Lester received an offer to provide gate guards for four existing communities from a local management company. The management company, ManageCo, was replacing their previous service and wanted Lester to provide a bid for services which he did. Lester was awarded the new contract but immediately found he had a problem. The new management company was a very slow payer on its invoices, taking nearly 60 days to remit service payments. Lester Thornton had always paid his guards weekly, which meant he would have to fund the payroll for the new guards and their services for roughly nine weeks before the first check came in from ManageCo. With guard services required around the clock at all four facilities, Lester would be making payroll for the new guards of over $10,000 per week (168 hours per week x $15 per hour x 4 facilities). He would need to make that payroll for 9 weeks or come out of pocket nearly $90,000 before he received ManageCo’s payment on the very first invoice.
Thornton simply did not have that kind of money available and unfortunately, had no ability to borrow more using his HELOC. He did, however, remember meeting a small
business finance specialist named Jerry Goggins who had given him his business card while at a recent Chamber of Commerce meetup. Jerry and Lester had discussed financing options for B2B services companies such as security services companies briefly, what Jerry did as an IACFB referrer, and the possible use of something called commercial factoring to finance Security Plus if it ever became necessary. In fact, Lester had recieved a mailer from Jerry just a few weeks ago including another business card and he knew exactly where it was. With the new guard services contract on the line, it had suddenly become necessary to find some financing and Lester made a quick call to Jerry.
Lunch Was on Jerry
After the call, Lester and Jerry agreed to meet for lunch to discuss factoring and how it was used worlwide to solve problems exactly like the problem Security Plus was faced with. Jerry immediately recognized that factoring would solve his new contract problem and allow him to fulfill the services. Jerry also felt that a fee of around factoring 5-6 percent for 60 – 70 day financing services was easily attainable through IACFB’s factor network of over 500 lenders with hundreds specializing in service sector finance. Lester had nearly a 50% profit margin on his services quote to ManageCo so he could easily absorb the factoring fee to finance the new contract. So together, they completed a short Company Profile which Jerry had brought with him to to the lunch regarding Security Plus. Jerry told Lester to expect a call from IACFB later in the afternoon to discuss the factoring arrangement in more detail and to answer any additional question he might have. After lunch, Jerry quicjly wen to his home office and sent a short email to IACFB Wholesale with the Company Profile attached.
Call From IACFB
Within the hours, Lester received a call from an IACFB underwriter to discuss the financing. The underwriter had already done some additional researched Security Plus to make certain the exisiting business loan was truly secured only by Lester’s home and not the business assets which would allow the factor to secure the factoring arrangement with current receivables. IACFB’s underwritier gave Lester a tentative factoring rate of 1.25% for 15 days which meant that 60 day payments made by ManageCo would only be charged 5% which was exactly what Lester was expecting. But… it also meant Lester now had the ability to factor all of his other receivables, which were usually paid in 30 to 40 days and some even less. All in all, Security Plus would be financing well over $100,000 per month with often his balance of current receivables outstancing approaching $180,000 to $200,000 per month. Within 72 hours, an IACFB factoring partner was chosen to provide financing for Security Plus and the factoring contracts were signed and put in place so the factoring services could begin.
Future Growth of Security Plus
Lester’s finance and invoice payment problem with the ManageCo contract was solved. Additionally, with the new financing facility in place, Lester could expand his guard services marketing efforts to other types of securuty services opportunities. These were jobs he was aware of but had always avoided bidding on the contracts due to the perceived slow payment on payroll invoices.
Jerry’s Factoring Fees
Though an IACFB agent, Jerry was actually a semi-retired bookkeeper and operated from his home office. His primary marketing he used for his business was his membersip to one of the St. Louis County Chambers of Commerce (West County) which was under $200 per year. He had added small business finance as an additional service to his bookkeeping business only after discovering the IACFB and it’s low cost training and services available. Jerry had always made it a point to attend all of the Chamber’s after-hours networking events generate leads and that is where he had met Lester.
As a factoring referrer, this was not Jerry’s first deal that he had sent in as an IACFB referrer. He had already tendered two through the IACFB “Leads Program” where he simply had sent in a name and had IACFB follow up. Two leads had become small clients and he was already receiving 2 commission chicks in the $300 range monthly. As an IACFB referrer and because of his new client relationship with Lester, Jerry would now dramatically add to his monthly referral commission payments and Jerry’s montly commission payment from his three accounts would total $1,000 monthly or even more. Additionally, that would likely grow since Lester’s intention was now to contract with more and more customers. FACTORING COMMISSION EARNINGS: $500 – $800 per month.
