AFS gets new credit facility
CORTE MADERA, Calif.—Alarm Financial Services plans to help more small- and medium-sized alarm companies finance growth with a new credit facility it closed with RBS Citizens Bank, AFS president Jim Wooster announced this week.
“We fit a niche for smaller loans, from $150,000 to about $1.5 million or perhaps up to $2 million,” Wooster said. He added: “That’s well below what traditional banks in the alarm industry like to lend. Because of their scale, traditional lenders like to lend in the $5 million and up range ... but the majority of alarm dealers don’t need to borrow $5 million.”
Wooster declined to reveal the exact amount of the credit facility, but said it’s “twice the size of our previous credit facility.” The Edmonds Group, an investment-banking group based in St. Louis, represented AFS in the transaction.
AFS has been in the alarm account acquisition business (buying books of accounts from $20,000 and up) since 1987. Four years ago, AFS hired The Edmonds Group to help it expand into the lending business as well.
The success of the lending program is the main driver behind the need to expand the credit facility, Wooster said. “We needed to increase our access to capital,” he said.
“AFS outgrew their [previous] bank,” Edmonds said. He added: “They became too big for a bank that didn’t have industry expertise. They needed to move to someone [such as Citizens] who understands their business better and could help them take their business to the next level.”
“Small- to medium-sized alarm companies that want to grow face a lot of challenges in this economy. Their account base may be stable, but it’s a challenge to [find the funding to] grow ... through acquisition,” Wooster said.
“For too long, big national and regional companies have come in and swooped up [local alarm companies that are for sale] ... even though a lot of smaller alarm company owners would prefer to sell their business to another small- to medium-sized alarm company that’s more like them,” he said.
Wooster said its new credit facility will enable AFS help more of those small alarm companies acquire other small businesses.