Security Dealer & Integrator

OCT 2016

Find news and information for the executive corporate security director, CSO, facility manager and assets protection manager on issues of policy, products, incidents, risk management, threat assessments and preparedness.

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50 Security Dealer & Integrator / www.SecurityInfoWatch.com October 2016 Central Station Monitoring Resource Guide 2016 O ne of the top chal- lenges for many smaller security dealers is securing funding. And while banks traditionally are the first institu- tions that come to mind, many security dealers have an alternative option: their third-party central station provider. Many central stations offer their dealers "financial services" — be sure to check each of the featured providers in our third-party central station mon- itoring provider directory (starting on page 54) to see which ones offer them. "Dealers take advantage of funding programs to cover their account creation costs and the associated overhead on new contract loans," says Michael Bodnar, Presi- dent of Security Partners LCC of Texas. "When receiving funding for bulk account acquisitions, the dealer oen uses the revenue to recapitalize, take out cash, or to finance acquisitions or expansion," Bodnar adds. "For most dealers, monitoring contracts are their primary equity. Sell- ing accounts is a short-term solution, while loans, as an alternative, can pro- vide critical cash flow and allow them to build long-term equity." Central stations offer the services in-house or via a third-party banking provider. Benefits range from reduced taxes to higher multiples if and when an owner decides to sell the business. "ird party central stations pro- vide financial services to support their dealers within the framework of two funding options — either Contract Acquisition, which provides funding for purchase of new accounts and the bulk purchase of aged accounts (contracts); or a Contract Loan Program, which provides an RMR multiple advance as a loan to the dealer for the creation of new accounts, or the bulk acqui- sition of existing accounts," Bodnar explains. "Typically, a dealer must sell contracts to get funding. While this might help the dealer with the immediate need for capital, it comes at a high price because they are sacrificing long-term equity in their business," says Jim McMullen, President & COO of COPS Monitoring. McMullen points out that COPS believes that owning its own accounts would be a conflict of interest with its dealers; thus, they do not purchase accounts directly. Instead, the provider has relationships with industry fund- ing companies. "e application pro- cess and requirements from banks and other lenders can be tedious, and the options are limited," McMullen says. "Funding from our partners is easier because the process is geared specifi- cally toward alarm dealers." "Dealers receive funding for acqui- sitions or loans based on the mul- tiples of an individual subscriber's contracted RMR, or for the total RMR value of the existing bulk account portfolio being acquired," Bodnar says. "As an acquisition, the acquiring party or buying-dealer assumes full control and ownership of the account base. As a loan, the central station or lender will assume billing of the subscriber account over the term of the loan." Whether dealers use these services via a central station provider or a lend- ing institution, many of the same crite- ria applies. Get a better idea what lend- ers are looking for in this article from Capital One: www.securityinfowatch. com/12197092 that appeared in SD&I;'s annual Money Issue this year. In Security Partners' funding pro- gram, dealers retain ownership of their accounts for the short and long-term. "Our funding program ensures that our dealers are able to service their customer, and also upgrade a subscrib- er's system or install additional secu- rity devices with an established line of credit for the subscriber." COPS has traditional funding options where a dealer can get top multiples by selling monitoring con- tracts, as well as loan programs that allow dealers to use their contracts as collateral while retaining ownership. Dealers can start and stop the program whenever they need capital, and they can fund a single account or a group of accounts. "e process is streamlined and dealers can get the funding they need quickly," McMullen adds. ■ Financial Services Don't overlook your third-party central station provider as a source for funding By Paul Rothman

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