Reps Can Offer New Firms Credit Assistance

Here you are, thumbing through this month’s issue of KBDN, dreaming the dream – “The American Dream.” You’re envisioning hanging the sign – you know the one – the one with your company name on it. And, you’re picturing those business cards with the raised lettering listing you as owner, proprietor or president of this venture. The best part of that business card is that it’s your license to do things your way. You’ll set the policy and you’ll make the decisions. You’ll do the work and, best of all, you’ll reap the benefits.

You’re certainly not alone in this dream. More and more kitchen and bath professionals are realizing it every day. We are at a point in our industry’s history where new dealerships are burgeoning, and they are up and running and flourishing at a much a faster rate than ever before. Being a rep, I not only witness this, but I participate in it actively. A significant percentage of my business is based on dreams like yours. My benefits are not only derived from expanding the number of my dealers, but also from growing my sales year after year as these companies flourish.

Getting Credit Support
One of the fundamental areas in which I often help a start-up company is credit. How can I, as a rep, get a company an open line of credit – or just simply an account with a manufacturer?

If you are about to start this process, your rep can help, because he knows all of the I’s to dot and all of the T’s to cross. If there are issues, the rep will know alternative ways for you to get started.

First and foremost, your goal is to establish an open account with a manufacturer. There are several steps to take in order to succeed with this.

To begin, you need to provide quality references to the manufacturer. These are companies that you have not only made significant purchases from, but also regularly pay within terms.

One of the credit managers I frequently deal with tells me that she looks for “favorable references with both volume and frequency.” This is tough for a start-up because, in all likelihood, you have not made these types of purchases before. If you have not, be willing to say so. Don’t list a reference and have the credit department make contact, only to find that your total purchases consist of a screw gun and shim shingles.

Your company is small and brand new; don’t try to camouflage it. A manufacturer is much more willing to work with you if you are up front about your status than if you give them information that turns out to be inaccurate. Next on your list is to provide good bank references. Your bank references need to demonstrate both that you have the financial wherewithal to pay your bills and that you have a good history.

Credit is black and white, and credit managers live by the old adage, “Those who fail to learn from history are doomed to repeat it.” If your financial history is checkered, there isn’t a good credit manager out there who is going to bet that it will change. As with your credit references if your bank references are not stellar, step up and tell everyone ahead of time.

When we have a potential dealer who is honest enough to tell us this in the beginning, we treat that person very differently from the ones who try to cover it up. When someone is up front and honest with us, we’ll do our best to work with that person. We may not be able to open the account exactly as the dealer wishes, but we will look for options. On the other hand, if there is anything that is suspect, we become suspicious and deny the account.

Besides following up on the references that you provide, most manufacturers subscribe to services such as Dunn & Bradstreet. These services gather financial information and provide their own rating on the credit worthiness of companies. Their overall ratings also weigh heavily on the decision to open your account. As a start-up, your business will not have ratings from these services, but if you have another business, acknowledge this. Though the decision to open your account cannot be made based on the other business, a good report on it can certainly help the credit manager give you more consideration.

Finally, and most significantly, you have to send in a completed credit application. Answer all of the questions and, above all else, sign it everywhere you are asked to. Not signing a credit application sets off red warning lights, and once they go off, it’s almost impossible to recover.

While some of the information on these forms may not seem important to you, the information is very important to the manufacturer. The financials are meaningful, but so is the location of your showroom, how you’ll take deliveries, what lines you’ll carry, your background in the industry, who your partners are and what your anticipated sales will be. The determination of whether to open a new dealer account is every bit based on these items as well as financials. Lack of information is as detrimental as bad information in trying to get your account open.

Other Options
Though the first goal may be to establish an open account, the above items may be hurdles that are just too much for you to overcome. If that’s the case, you can once again turn to your rep. For many valid reasons, the manufacturer may not be able to give you open credit, but there may be alternatives. If your rep is sold on your integrity and potential, he or she will look for ways to sell to you.

Many new dealers start as C.O.D. or Cash In Advance accounts. You sell a job, collect a large percentage up front and use that money to pay the manufacturer before it ships to you. This is a lot of work for the manufacturer, but if you successfully sell firms on you and your potential, many are willing to work with you like this in the short term. The goal here is to create a successful track record and eventually earn credit terms with the manufacturer.

A final option that your rep may be able to help you with is setting your account up with a credit card. Many manufacturers will now allow you to prepay for product with a credit card. If you have access to this resource it, too, can be used to build that track record and work toward eventually having credit terms. Plus, you can really rack up the air miles!

As you take hold of the “American Dream,” work closely with your rep and communicate well – especially concerning credit. Remember that your company is new and small; don’t try to hide it. Sell your dream, show people your integrity and they’ll find a way to help you.

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