Who can benefit from Contract Financing?
Literally, there are thousands of small companies, that either have or are working on a contract for a company that is investment grade credit rated (BBB or higher) or a contract with Federal, State and Local governments. Often these companies need capital to start or complete the contract.
What is Contract Financing?
Contract Financing (or monetizing a contract) is a very flexible financial tool that provides needed capital to a business. Although each transaction can be custom designed to meet the needs of the borrower, it does require a UCC filing on the borrower's equipment. It is far less expensive and onerous than equity or sub-debt, and the capital derived from contract financing can be used for virtually any purpose.
Typically there is a service/product provider (usually a small to medium sized company) and an end user (investment grade company, or governmental entity). Contract Finance terms can be as short as 12 months, or as long as 10 years.
When and Where can you get started looking for Contract Finance deals?
IMMEDIATELY! Looking for Contract Finance deals isn’t hard; just contact any of the following types of referral sources that are in your network of contacts:
- Commercial Bankers
- CPAs
- Private Equity
- Merchant Bankers
- Venture Capital Firms
- Vendors
- Service Providers
- Manufacturers
- IT Consultants
Why is Contract Finance valuable to you and your customers?
This form of financing can be extremely valuable to small to medium sized companies that don’t have the resources to buy equipment or adequate working capital. In many cases, it can be used as an alternative to equity or to augment existing equity. In fact, many smaller companies do not bid large contracts for fear that they will be unable to fulfill them because of a lack of capital. The equipment necessary to fulfill a contract can be existing equipment that is refinanced or sold and leased back, or brand new equipment that is located at either the provider’s or the end user’s location. Contracts do not need to be new to qualify for Contract Finance. The remaining balance/term of an existing contract can be monetized.
How does Contract Financing work?
Cinergy Commercial Capital will work with your customer and provide the necessary language, embedded in the contract via addendum, that will allow for an assignment of all or a portion of the future revenues. A present value of those future contract revenues, along with the equipment collateral, provides your customer the capital they need to complete contracts and grow.
Are You Asking The MAGIC Question?
From time to time we need to remind ourselves that we’re all in sales, no matter what we do or who we are.
Is there a sure-fire way to generate interest from each and every contact you make? There is, says Neil Baron, writing at the Fast Company blog: Just ask the Magic Question.
"The Magic Question is that one question you need to ask to get a prospect to say 'please tell me more,'" Baron explains. "The trick is to generate curiosity quickly."
A typical Magic Question starts with a story that takes this form:
- "My company has developed (a new product or service) that has helped (a leading company in the customer's industry) achieve (the following important business benefits).”
It then "goes in for the (sales) kill" by asking:
- "Would you like to learn how we did it?"
"If the question is phrased properly, the prospect can't help but say yes," Baron says. And that's always good news: "You have now grabbed their attention and gained their implicit permission to continue to ask more exploratory questions."
So, how do you format Magic Questions to fit your business? It’s important to define three basic things:
- A clear description of what you’re selling
- References that are respected by your prospect
- Concisely stated business benefits delivered by you that you know will resonate with your prospect
Driving a conversation further and accelerating the sales cycle can be accomplished simply by asking the Magic Question.
The Po!nt: Formulate it and pose it. "Over the years, I've learned that initiating the sales process by asking a single attention-grabbing, curiosity-raising question is the most effective way to accelerate revenues," Baron concludes.
Source: Fast Company. Read the full post. |
