Chairman, Principal, Co-Founder, Director, Direct Capital
Before he co-founded Direct Capital, Christopher spent 15 years in the alternative asset class arena on behalf of large tax-exempt institutional investors, managing long-term global investments in plantation forestry. When that private company was sold to the Union Bank of Switzerland, he began to search for his next venture. James’ background prior to joining Direct Capital was serving the small business market for a regional financial planning company.
“After studying the equipment finance marketplace, it became clear to me that there was an opportunity to serve a very important segment of the economy that was underserved. Nobody was actively providing the financing on a national basis, and that opened my eyes to an exciting business,” Christopher explains.
Building the Vendor Business
Christopher credits the company’s success — and survival during the economic downturn — in part to its capital structure, financial strength and discipline.
“Direct Capital weathered the credit and capital market crisis storm better than most. Jim and I had always talked about being prepared for when the clouds come. Our portfolio held up, we were lean and mean, we had a tremendous balance sheet. And, we had access to senior debt capital, and in that 2008-2009 period few were lending. But, Direct Capital not only renewed and extended existing credit facilities with a few large banks, we brought new banks into our lineup and extended the funding capacity of the company in a meaningful way,” Christopher recalls.
Regarding the significant growth in the company’s vendor business, James explains that before 2010, Direct Capital was not organizationally set up to grow a vendor segment in a durable and scalable way. Since then the company has invested in experienced senior leadership to build the vendor process from origination through operations, which has allowed the company to maintain a high service level and provide automation.
“Now we have an institutional vendor platform that covers an extremely wide range of industries and asset types with a consistent service delivery level that blows the vendors away. If you can provide vendors with great service, generate a high level of approvals and do it over and over again, on top of getting them paid quickly, you’re going to attract the right kind of attention,” James adds.
Contributing to the success of its vendor program is the use of technology. The company’s “ClickFund,” an electronic document signing process, reduces the payment cycle from days to hours, James reveals. The implementation earned Direct Capital an honorable mention award in Operations & Technology Excellence from the ELFA in 2010.
“Vendors are getting paid 25% faster with ‘ClickFund.’ This has increased growth from existing vendor accounts and brought in new accounts,” James notes.
Asset Classes and Outlook
Direct Capital’s top asset class by volume in 2011 was restaurant equipment, with a focus on the quick-serve franchise restaurant industry space, a segment that Christopher says proved to be resistant to recessionary pressures and performed quite well in the down period.
James adds, “Understanding the market is key to being able to assess the risk, segment the industry and lend to it properly. We use analytics and our 19-plus years in the business to measure how the risk plays out over time. The segments within the restaurant industry that we target have performed very well for us, and we’re known as a leader and expert in franchise financing.”
Moving forward, Christopher says that company leadership is confident about the future, noting an improving (albeit slowly) economy and general acceleration in demand for equipment, upgrades and replacement of old equipment. He continues, “We’re optimistic in the medical industry and the healthcare arena. We’re seeing a lot of opportunity in that space and have put in place about a dozen programs in the last several months.”
Christopher and James predict significant growth in 2012 new business volume, attributable in part to ongoing analysis of the company itself, deploying personnel efficiently and continuing to leverage technology, as well as never losing sight of their founding principles of providing customers with simple, fast and cost-effective access to capital.
“One of the things that I do as CEO of the company is constantly challenge our business from the inside and the outside and ask questions like: ‘How can we improve this experience?’ and ‘How can we improve this process?’ As we evolve as a company, making sure that we understand the need to define new roles and find the appropriate hires has really been important in setting up the platform for growth in 2012 and beyond,” James explains.
Fostering Core Values — Inside and Out
In June 2012, Direct Capital placed second in a survey by Business NH Magazine and the Center for Family Business at the University of New Hampshire of the 75 top family-owned businesses in New Hampshire ranked by 2011 revenues. Christopher describes the advantages of being a family- and employee-owned business: “We can take a long-term approach to the business, and that offers a competitive edge because we can make investments that may not pay off for a year or several years down the road. Many others in this space, whether it’s the bank-owned or publicly owned leasing companies, have constituencies to deal with, and those pressures can be counterproductive to doing the right thing for the business.”
Three years ago, Direct Capital kicked off a branding effort, using the recession as an opportunity to reflect on what the company wanted to become and to understand how people view it. James explains that the brand counsel, comprised of representatives from every department in the company, referred to Zappos CEO Tony Hsieh’s Delivering Happiness: A Path to Profits, Passion, and Purpose, specifically channeling a key theme that a company’s culture is its brand, and its brand is its culture. The process led to defining Direct Capital’s brand and identifying its core values: Make every customer experience remarkable; be scrappy; crush obstacles; seek change; invent solutions; drive “Big Mo” [momentum] for success; be point blank; bring it — passion all day, every day; and enjoy the ride.
“It was a challenging process to go through because you have to look at yourself in the mirror. But, that level of openness helped us to come up with these core values that we use in the interview process, employee performance reviews, customer service and surveys. You can’t be a group of individuals with extraordinary talent. You have to be a group of people that leverages each other’s respective gifts to achieve something that’s special. And that’s what we are focused on,” James reveals.
He goes on to explain that charitable efforts tie the core values together. Every Friday, Direct Capital has a “denim for dollars drive” in which employees contribute money for the opportunity to wear jeans and to raise money for co-workers experiencing an unfortunate life event or for outside charities. On the corporate side, every time Direct Capital conducts an online transaction, the customer directs where the company will contribute a donation to local charities.
Christopher relates, “The employees have this tremendous career experience and this environment fosters performance at a much higher level, and that’s evident if you look at tenure in our firm. Turnover is practically nonexistent. That’s a strong endorsement of what this culture is producing. We see the direct benefit.”
As for the brothers’ favorite core value? Both lean toward driving momentum. “I love them all, but I’m motivated by ‘Drive Big Mo’ because Jim and I have ambitious plans for the company, and we’re approaching a billion a year in production, and I like the sound of numbers that start with a B,” Christopher adds. m
Lisa M. Goetz is an associate editor of the Monitor.