Financing a call center in growth mode is a tricky business. That’s because when your call center is growing, you focus on all aspects of the business: making payroll, building out space, investing in people and new technologies, and training staff. There’s a lot going on, all at the same time, and all of these efforts have costs associated with them.
Ultimately, call center companies in this stage are trying to figure out how they can afford to expand and grow while maintaining their service levels with current customers. So then how do call centers manage upfront costs associated with expansion while keeping customers happy in this volatile world of call center management?
Often in growth mode, call center companies look for financing. Here are three tips for doing that the right way.
Find the right type of financing from the right lender or financial institution.
Many call center companies don’t know what type of financing is available and often ask a friend or colleague for recommendations. It’s important to do your research, look into all options available – from traditional financial institutions and banks to alternative financing partners. With traditional lenders such as banks, completing the financing process can take three to six months. With alternative financing companies, such as factoring companies, there’s an opportunity to secure financing in just a few weeks.
Have your financial information at the ready.
To engage with any lender or institution the key is to be organized and have information about your business prepared. Alternative financing companies are focused on your assets and your growth potential. Before a call with a prospective financing partner, the most important thing to do is be prepared. Having information at the ready, including customer lists, a copy of accounts receivables and the aging report and other financial statements, can help speed access to financing by providing a clear picture of the company’s current and future needs.
Here’s a short checklist of questions to ask yourself before engaging with a financing partner:
• How long have you been in business?
• How much money do you need?
• Are you using a sophisticated, electronic communication system to track the number of calls, and the time your agents spend on the calls, to bill your customers? You want your financial partner to be as sophisticated as you are and be able to understand which systems you are using.
• Are you extending payment terms to your customers? Is this causing a cash crunch as you wait for invoices to be paid?
• Do you have any assets or collateral besides receivables?
Provide projections and a growth plan.
Financing partners like to see financial projections, so providing a clear picture to the financing company is critical. How do you envision operations and revenue in the next 12 to 24 months? Detailing growth plans on a monthly or quarterly basis gives comfort to the lender about the growth of your business, and helps the alternative financing company structure a flexible working capital facility that will support the cash flows that your business need. A factoring company will be mostly focused on the credit quality of your customers. This is a good opportunity for a small and early stage business to leverage the credit quality of its customers. You need to ask the factoring company if it can handle the growth, whether it will put a cap on the working capital facility, and whether it will be able to continue to finance your growth projections.
The Bottom Line
The most important thing to do when approaching a financing option is to do your diligence and find the right financing partner. Look for a partner that understands how the business operates, how it bills and invoices, and what are the current and future cash needs. While your business is growing, you need flexible access to cash, with little restrictions or covenants, so you can focus on the business. A factoring company will evaluate the ability to track a call center’s performance on an ongoing basis – verifying receivables by utilizing signed time sheets in the system, statements of work – and will be prepared to provide additional financing as new customers are added. Oftentimes, a commercial bank or large traditional bank may try to fit a call center into its traditional lending model, which is like forcing a square peg in a round hole. Just make sure that the lending institution you go with can adequately address how the cash flows to your business and what your cash needs are on a daily basis.
Choose a partner that understands that if a call center can only bill monthly, it still needs to meet expenses throughout the month, such as satisfying weekly payroll obligations, lease payments, and equipment purchases. This kind of partner can help call centers find a structure of financing that helps you during those periods of the month when you need it, with the flexibility to structure the financing to the business processes of your company.
Edited by Kyle Piscioniere