key ingredients for success

Key Ingredients for SuccessKey Ingredients for Success

Scott TillesenVice President, Credit and Customer Care – The Americas

Todd JordanGE Capital Finance

Scott TillesenVice President, Credit and Customer Care – The Americas

Todd JordanGE Capital Finance

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Tech Data Confidential2

Electronic Resources at Tech DataElectronic Resources at Tech Data

www.techdata.com

• 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


Key Ingredients for Success:

Creditor Relationships

Financing Alternatives

Cash Flow Forecasting and Management


Creditor Relationships


Creditor RelationshipsCreditor Relationships

• Profit – Especially profit retained in the business

• 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


Timely and Full CommunicationTimely and Full Communication

• Share Information:

– Mergers & Acquisitions, New Vertical Markets, Staffing Changes, New Locations

• Experience and Education of Owners / Operators

• Use Email

• Use Website

• Bad News is Better than No News


Financing Alternatives


Financing AlternativesFinancing Alternatives

• 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.

• 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


Financing Sources Pie ChartFinancing Sources Pie Chart

Bank Financing

ShareholderFinancing

Vendor Financing

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.


Credit Limits from SuppliersCredit Limits from Suppliers

• 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


Standby Letters of Credit ExplainedStandby Letters of Credit Explained

• 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.


End User Payment AlternativeEnd User Payment Alternative

• Assign your accounts receivable to Tech Data via an Assignment of Proceeds (“AOP”).

• 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.

• Subject to the end-user being credit qualified.


Bank Line FinancingBank Line Financing

• Needed to meet overhead obligations.

• Sometimes needed to close the gap between accounts payable and accounts receivable.

• Keeps creditor happy at a minimal expense.

• Is used by every Fortune 500 company.

• Financing from Tech Data’s financial partners has advantages.


Inventory Financing Thru Tech Data Inventory Financing Thru Tech Data Financial PartnersFinancial 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.


Financing thru Tech Data Financing thru Tech Data Financial PartnersFinancial Partners

• Can be used in addition to your Tech Data open account.

• Free financing supported by Tech Data and certain product manufacturers.

- 30 to 60 day terms in most cases

• Tech Data Financing Company Partners:

– GE Computer Distribution Finance, Castle Pines Capital, De Lage Landen, and IBM Global Finance

GE Capital Solutions Programs

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• Inventory Finance• Asset Based Working Capital Solutions• Purchase Order Financing (S.T.A.R.)• International Trade 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

• 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

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.

Our Heritage…

CDF Custom Solutions…

GE Capital Solutions - Commercial Distribution Finance

Enabling Clients to…

A Few of our Partners…

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Financing of large purchase orders

Establish Obligor specific financing terms to relieve capital impact of large contract orders

CDF Channel Finance Solutions

S.T.A.R. – Receivables Fin.

Branded – transparent to customer, support reseller opportunities

Maximize cash-flow for growth…

Secured lending to Distributors and VARs to supplement operating capital requirements

Motivate distributors to stock deeper,

provide terms to resellers

Extended terms facilitating product movement through distribution channels

Financing over the water…

Importer terms supported by exporters, providing inventory for growth and seasonal demands

Sales SolutionsRevolving LinesSales Channel

FinanceImport Services

A/R Purchase Asset Based

Financing Direct Structures Indirect through

multi-tier distribution

No LOC or Advance Pay requirement

Reduce administrative cost

Providing innovative solutions to support the entire market channel, accelerate cash-conversion cycles, drive sales growth, and reduce associated

risk and administrative cost

Working Capital

Solutions

Inventory Financing

International Trade

Financing

Purchase Order

Financing

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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 OptionsIncreasing Purchasing Power

SMB Line

Plus Line

XL Program

$250K

$500K

$1.5MM Credit Line

Web Application Credit Scoring

Web Application Credit Scoring Financial Review

$25K

Financial Review Secondary Secured

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General Application Requirements

Application Process

Minimum 1 Year in Business

D&B Credit Score of at least 42

Positive Tangible Net Worth

Qualifying Personal Credit Score

Annual Product Revenue of at least $250K.

Re-Tax Profit for the last 2 years

Qualifying for a credit line with GE CDF

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

**Requirements vary dependent upon the size of credit line requested.

After Credit Approval

Streamlined Account Management through our Online Tools

Automatic Order Approvals via EDI

Dedicated Account Manager

Generous Credit Capacity

Extended Terms

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Contacts

Take advantage of the immediate ability to drive sales through:

Reduced Credit RiskMaintain DSO Extended Terms Financing

Todd JordanTech Data Relationship ManagerGE Capital Solutions FinanceP: 800-237-8931 * 75697C: 727-480-5143E: [email protected]

Dedicated GE support to help drive sales growth and support customer needs

Increased SalesCredit Capacity STAR PO Financing


End User Lease FinancingEnd User Lease Financing

• Reseller identifies end-user to leasing company.

• Leasing company approves and documents the deal.

• Leasing company pays reseller.

• Tech Data can also be paid directly by the leasing company.

• Tech Data Leasing Partners:– IBM Global Finance, HP Financial Services, CIT,

and others with prior approval.


Personal GuarantyPersonal Guaranty

• Business owners and officers can provide their personal guaranty of the obligations of their business.

• Can usually help support an incremental increase in the amount of credit being offered.

• Guarantor can rescind the guaranty at any time.

• An appropriate alternative to consider.


A Case for Equity InfusionA Case for Equity Infusion

• Vendors compare the size of their investment to yours.

• They like to see that you have “skin in the game”.

• Credit managers like to see profits retained in the business.

• Quantify sources of additional shareholder investment.

• Every Fortune 500 company sought outside investors to enable their growth.


Cash Flow


Cash FlowCash Flow

• Forecasted

• Manage The Timing

– Outflow Later

– Inflow Sooner

• Manage The Amount

– Less Outflow

– More Inflow


Forecasting Cash FlowForecasting Cash Flow

• Identify The Amount and Source of Cash

• Plan The Amount and Use of Cash

• For operating purposes forecast the next 13 weeks.

• Forecast in Time Increments According to Your Primary Outflows (Use) of Cash

• Failure to forecast properly can be very bad.


Manage the Timing of Cash FlowManage the Timing of Cash Flow

• Outflows Later

– Accounts Payable Terms

• Inflows Sooner

– Accounts Receivable Terms and Practice


Accounts Payable Practice Accounts Payable Practice ImprovementImprovement

• Know your suppliers process and be sure they know yours.

• Determine in advance what options are offered.

• Negotiate mutually agreed terms.


Accounts Receivable Practice Accounts Receivable Practice ImprovementImprovement

• Strong Credit Application

• Clear Understanding of Terms of Sale

• Analyze Your Customer

• Consistent Collection Process


Manage the Amount of Cash FlowManage the Amount of Cash Flow

• Less Outflow

– Operating Expenses

– Capital Equipment

• More Inflow

– Added Billable Services

Beginning Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9

AssumptionsCredit SalesPurchases on Credit

Cash InflowsCash SalesAccounts Receivable CollectedProceeds from LoansInvestment by Owners

Total Cash Inflow - - - - - - - - -

Cash OutflowsAccounts Payable PaidSalaries PaidSales Taxes PaidRent and Utilities PaidLoan PaymentsTravel Expenses Paid

Total Cash Outflow - - - - - - - - -

Net Cash Flow - - - - - - - - -

Net Cash Balance 0 - - - - - - - - -

Cash Flow Forecasting Model

Sample Cash Flow SpreadsheetSample Cash Flow Spreadsheet

Beginning Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9

AssumptionsCredit Sales 3,500 3,600 3,800 3,000 3,200 3,300 3,400 3,500 3,600 Purchases on Credit 2,300 2,400 2,500 2,200 2,400 2,300 2,300 2,400 2,500

Cash InflowsCash Sales 200 200 200 200 200 200 200 200 200 Accounts Receivable Collected 3,200 2,400 3,000 3,500 3,500 3,200 3,000 3,000 3,400 Proceeds from Loans 1,000 Investment by Owners 500

Total Cash Inflow 3,400 2,600 3,200 4,200 3,700 3,400 3,200 3,200 4,600

Cash OutflowsAccounts Payable Paid 2,700 2,200 2,500 2,400 2,200 2,500 2,400 2,200 2,500 Salaries Paid 800 800 800 800 800 800 800 800 800 Sales Taxes Paid 300 Rent and Utilities Paid 1,000 1,000 1,000 Loan PaymentsTravel Expenses Paid 300 700 400 400 400 400 400 400 400

Total Cash Outflow 4,800 3,700 3,700 3,600 4,400 3,700 3,900 3,400 4,700

Net Cash Flow (1,400) (1,100) (500) 600 (700) (300) (700) (200) (100)

Net Cash Balance 5,000 3,600 2,500 2,000 2,600 1,900 1,600 900 700 600

Cash Flow Forecasting Model

Sample Cash Flow ForecastSample Cash Flow Forecast


1. Creditor Relationships2. Supplier Financing3. Bank / Finance Company Financing4. Owners / Equity Financing5. Cash Flow Forecasting6. Managing the Timing of Cash Flow7. Managing the Amount of Cash Flow

SummarySummary

The Difference In DistributionThe Difference In Distribution

Scott TillesenVice President, Credit and

Customer Care – The Americas

Tech Data Corporation5350 Tech Data Drive

Mail Stop #A3-18Clearwater, Florida 33760

[email protected] phone: 727-538-5880www.techdata.com/credit

key ingredients for success

Documents

newstech data confidential

optionstech data confidential

favor of tech data

tech datawww

inventory financing

source of financing

payment systemwww

enduser financingshareholders