Key Ingredients for Success
April, 2009
Scott Tillesen
Director of Credit, SMB Accounts
Todd Jordan
GE Capital Finance
Electronic Resources at Tech Data
www.techdata.com
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On-line invoice inquiry
On-line customer statements
www.techdata.com/TDDirectPay
• Internet Bill Presentation and Payment System
www.techdata.com/credit
• Financing solutions and options
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Key Ingredients for Success:
Creditor Relationships
Financing Alternatives
Cash Flow Forecasting and
Management
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Creditor Relationships
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Creditor Relationships
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Profit – Especially profit retained in the
business
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Owners Investment – Skin in the Game
Have a Forward Looking Plan
Utilize Appropriate Financing Options
Good References – Bank and Trade
Working Capital Management
Provide Security
Timely and Full Communication
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Timely and Full Communication
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Share Information:
– Mergers & Acquisitions, New Vertical
Markets, Staffing Changes, New Locations
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Experience and Education of Owners /
Operators
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Use Email
Use Website
Bad News is Better than No News
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Financing Alternatives
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Financing Alternatives
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As revenue grows there will be more assets such as
inventory, accounts receivable, and equipment.
• Resellers need to plan how additional assets will be
financed.
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There are three general sources of business financing
that need to be considered:
– Suppliers: Credit limits and end-user payment alternatives
– Banks/Finance Companies: Inventory financing and end-user
financing
– Shareholders: Personal guarantees and equity infusion
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Financing Sources Pie Chart
While there is no
magic formula to
say exactly in what
proportion each
source of financing
should be, what is
known is that
successful
companies need all
three sources to
grow.
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Bank Financing
Shareholder
Financing
Vendor Financing
Credit Limits from Suppliers
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Maximize Credit Limits with Terms by:
– Sharing Financial Statements
– Having good industry payment record
– Not having any reported liens, suits, or judgments
– Disclosing education and experience of owners and
operators
– Providing a personal guaranty or security interest
– Providing a Stand By Letter of Credit (“SLOC”)
– Communication
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Standby Letters of Credit Explained
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Visit your bank and ask for SLOC in favor of Tech Data.
Specific dollar amount and time period.
Tech Data will provide you with the words needed on
the document.
• Provide the finished document to Tech Data.
• Stands as secondary support for payment.
• More cost effective than a bank loan.
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End User Payment Alternative
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Assign your accounts receivable to Tech Data via an
Assignment of Proceeds (“AOP”).
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Tech Data provides the required wording for Reseller
to put on their letterhead.
• Reseller signs the document as does the end-user.
• Provides end-user agreement to pay Tech Data directly.
• Great alternative for a specific large transactions or on
an ongoing basis.
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Subject to the end-user being credit qualified.
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Bank Line Financing
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Needed to meet overhead obligations.
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Sometimes needed to close the gap between
accounts payable and accounts receivable.
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Keeps creditor happy at a minimal expense.
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Is used by every Fortune 500 company.
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Financing from Tech Data’s financial partners
has advantages.
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Inventory Financing Thru Tech Data
Financial Partners
1. Reseller applies and obtains a credit line with a Tech
Data finance partner.
2. Reseller places order as usual with Tech Data.
3. Tech Data obtains electronic authorization from the
finance partner and ships the order.
4. Finance partner pays Tech Data.
5. Reseller pays the finance partner.
6. Oh yes, this financing is FREE.
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Financing thru Tech Data
Financial Partners
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Can be used in addition to your Tech Data open
account.
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Free financing supported by Tech Data and
certain product manufacturers.
- 30 to 60 day terms in most cases
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Tech Data Financing Company Partners:
– GE Computer Distribution Finance, Castle
Pines Capital, De Lage Landen, and IBM
Global Finance
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GE Capital Solutions Programs
GE Capital Solutions - Commercial Distribution
Finance
GE Capital Solutions provides Working Capital and Inventory
Financing to support the movement of products through the Technology, Security Electronics
and Appliance supply chain
Our Heritage…
For over 50 years, Capital Solutions through its Commercial Distribution Finance unit has
partnered with companies across all industry segments, supporting the business to business
channel. Today, CDF manages sales volumes approaching $60 Billion annually.
CDF Custom Solutions…
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Inventory Finance
Asset Based Working Capital Solutions
Purchase Order Financing (S.T.A.R.)
International Trade Finance
Enabling Clients to…
• Expand market reach, increase sales
• Manage sales opportunities through innovative
programs partnered with industry leading
vendors
• Accelerate cash conversion cycles, expand
DPO
• Minimize liquidity risk
A Few of our Partners…
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CDF Channel Finance Solutions
Providing innovative solutions to support the entire market channel, accelerate cashconversion cycles, drive sales growth, and reduce associated risk and administrative cost
Inventory
Financing
Motivate distributors
to stock deeper,
provide terms to
resellers
Extended terms
facilitating product
movement through
distribution channels
 Direct Structures
 Indirect through multitier distribution
Sales Channel
Finance
Working Capital
Solutions
Maximize cash-flow for
growth…
Secured lending to
Distributors and VARs to
supplement operating
capital requirements
 A/R Purchase
 Asset Based Financing
Revolving Lines
Purchase Order
Financing
International
Trade Financing
Financing of large
purchase orders
Financing over the
water…
Establish Obligor
specific financing terms
to relieve capital impact
of large contract orders
 S.T.A.R. – Receivables
Fin.
 Branded – transparent
to customer, support
reseller opportunities
Sales Solutions
Importer terms supported
by exporters, providing
inventory for growth and
seasonal demands
 No LOC or Advance
Pay requirement
 Reduce administrative
cost
Import Services
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Cisco and GE Capital Solutions
 $9.1 billion Global Financing Cisco FY 2008
 North America, Europe, MEA/CEE, Japan, and Asia
 684 US Partners using program
 60 days interest free terms and bank type working capital solutions
 Promotional 90 day terms for Cisco Select partners launched
12/15/2008
 12 years of Cisco and Tech Data / GE finance relationship
 GE on-site representation at Cisco in San Jose and Tech Data
Clearwater Campus
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Partner Financing Options
Increasing Purchasing Power
$1.5MM
Credit Line
XL Program
Financial
Review
Secondary
Secured
$500K
Plus Line
Web Application
Credit Scoring
Financial Review
$250K
SMB LineWeb Application
$25K
Credit
Scoring
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General Application Requirements
Qualifying for a credit line with GE CDF
 Minimum 1 Year in Business
 Qualifying Personal Credit Score
 D&B Credit Score of at least 42
 Annual Product Revenue of at least $250K.
 Positive Tangible Net Worth
 Re-Tax Profit for the last 2 years
Application Process
 Online application:
www.techdata.com/GEFinancing
 Filed Stamped Copy of the Articles
of Incorporation
 Last 2 Fiscal Year-end Financial
Statements.
 24 to 48 Hour Credit Approvals
After Credit Approval
 Streamlined Account Management
through our Online Tools
 Automatic Order Approvals via EDI
 Dedicated Account Manager
 Generous Credit Capacity
 Extended Terms
**Requirements vary dependent upon the size of credit line
requested.
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Contacts
Dedicated GE support to help
drive sales growth and support
customer needs
Todd Jordan
Tech Data Relationship Manager
GE Capital Solutions Finance
P: 800-237-8931 * 75697
C: 727-480-5143
E: todd.jordan@ge.com
Take advantage of the immediate ability to drive
sales through:
Increased Sales
Reduced Credit Risk
Credit Capacity
Maintain DSO
Extended Terms Financing STAR PO Financing
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End User Lease Financing
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Reseller identifies end-user to leasing
company.
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Leasing company approves and documents
the deal.
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Leasing company pays reseller.
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Tech Data Leasing Partners:
Tech Data can also be paid directly by the
leasing company.
– IBM Global Finance, HP Financial Services, CIT,
and others with prior approval.
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Personal Guaranty
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Business owners and officers can provide their
personal guaranty of the obligations of their
business.
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Can usually help support an incremental
increase in the amount of credit being offered.
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Guarantor can rescind the guaranty at any
time.
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An appropriate alternative to consider.
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A Case for Equity Infusion
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Vendors compare the size of their investment
to yours.
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They like to see that you have “skin in the
game”.
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Credit managers like to see profits retained in
the business.
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Quantify sources of additional shareholder
investment.
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Every Fortune 500 company sought outside
investors to enable their growth.
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Cash Flow
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Cash Flow
• Forecasted
• Manage The Timing
– Outflow Later
– Inflow Sooner
• Manage The Amount
– Less Outflow
– More Inflow
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Forecasting Cash Flow
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Identify The Amount and Source of Cash
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Forecast in Time Increments According to
Your Primary Outflows (Use) of Cash
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Failure to forecast properly can be very bad.
Plan The Amount and Use of Cash
For operating purposes forecast the next 13
weeks.
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Manage the Timing of Cash Flow
• Outflows Later
– Accounts Payable Terms
• Inflows Sooner
– Accounts Receivable Terms and
Practice
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Accounts Payable Practice
Improvement
• Know your suppliers process and be
sure they know yours.
• Determine in advance what options
are offered.
• Negotiate mutually agreed terms.
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Accounts Receivable Practice
Improvement
• Strong Credit Application
• Clear Understanding of Terms of Sale
• Analyze Your Customer
• Consistent Collection Process
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Manage the Amount of Cash Flow
• Less Outflow
– Operating Expenses
– Capital Equipment
• More Inflow
– Added Billable Services
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Sample Cash Flow Spreadsheet
Cash Flow Forecasting Model
Beginning
Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
Week 8
Week 9
Assumptions
Credit Sales
Purchases on Credit
Cash Inflows
Cash Sales
Accounts Receivable Collected
Proceeds from Loans
Investment by Owners
Total Cash Inflow
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Total Cash Outflow
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-
-
-
-
-
-
Net Cash Flow
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-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Cash Outflows
Accounts Payable Paid
Salaries Paid
Sales Taxes Paid
Rent and Utilities Paid
Loan Payments
Travel Expenses Paid
Net Cash Balance
0
Sample Cash Flow Forecast
Cash Flow Forecasting Model
Beginning
Assumptions
Credit Sales
Purchases on Credit
Cash Inflows
Cash Sales
Accounts Receivable Collected
Proceeds from Loans
Investment by Owners
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
Week 8
Week 9
3,500
2,300
3,600
2,400
3,800
2,500
3,000
2,200
3,200
2,400
3,300
2,300
3,400
2,300
3,500
2,400
3,600
2,500
200
3,200
200
2,400
200
3,000
200
3,500
200
3,500
200
3,200
200
3,000
200
3,000
200
3,400
1,000
500
Total Cash Inflow
Cash Outflows
Accounts Payable Paid
Salaries Paid
Sales Taxes Paid
Rent and Utilities Paid
Loan Payments
Travel Expenses Paid
3,400
2,600
3,200
4,200
3,700
3,400
3,200
3,200
4,600
2,700
800
2,200
800
2,500
800
2,400
800
2,200
800
2,500
800
2,400
800
300
2,200
800
2,500
800
1,000
Total Cash Outflow
Net Cash Flow
Net Cash Balance
Week 1
5,000
1,000
1,000
300
700
400
400
400
400
400
400
400
4,800
3,700
3,700
3,600
4,400
3,700
3,900
3,400
4,700
(1,400)
(1,100)
3,600
2,500
(500)
2,000
600
2,600
(700)
1,900
(300)
1,600
(700)
(200)
(100)
900
700
600
Summary
1. Creditor Relationships
2. Supplier Financing
3. Bank / Finance Company Financing
4. Owners / Equity Financing
5. Cash Flow Forecasting
6. Managing the Timing of Cash Flow
7. Managing the Amount of Cash Flow
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The Difference
In Distribution
Scott Tillesen
Director of Credit, SMB
Accounts
Tech Data Corporation
5350 Tech Data Drive
Mail Stop #A3-18
Clearwater, Florida 33760
USA
Scott.Tillesen@techdata.com
Direct phone: 727-538-5880
www.techdata.com/credit