Smart Execution, Good Customer Relationships: Keeping Enterprise Funding Ahead of the Curve
by Monitor Staff March/April 2007
Good business ideas need good execution, and that often happens when people come together from disparate places. For Grand Rapids, MI-based Enterprise Funding Group, the quality of the idea has really taken off since the right person came along to enhance its execution.
When Enterprise was established in 1996 by principal Mike Coon and a partner, it was a regional lessor primarily serving Michigan and the Midwest, but the duo had a much bigger vision — to transition from lessor to funding source and servicer. With investors committed and a solid plan in hand, Enterprise began implementing the transition process and began trying to secure a steady stream of deals.
But as often happens with new ventures, growing volume proved to be a challenge.
Flash forward to a retired executive from the Chicago securities firm Van Kampen Merritt who was looking for an investment opportunity that showed promise but needed a jump-start and a chance to hone its approach.
Fred Croft, who was operating under the auspices of James Investments, remembers a business associate suggested he take a look at Enterprise. “They had a good idea, which I believed could work well given the right direction,” Croft, now CEO of Enterprise Funding, says.
He stepped in and invested in the company — with about half of the proceeds being used to gain voting control of the company and the remainder used to increase working capital. Then he began applying the lessons he learned from his longtime boss, Bob Van Kampen.
“The most important thing was metrics,” Croft explains. “Bob had a philosophy that you could put everything you really need to know about a business on one page. We kept a sheet for every company that we reviewed on a weekly or monthly basis. And it works. So Mike and I sat down and talked about what things really made a difference in this business, and we figured out how to measure them. And then we put in weekly reports. Mike’s got one page that summarizes all our productivity. We’ve got one page that summarizes all the financials, one page that summarizes the collections. We go through them every week. Something may spur a discussion, or if there’s an issue, we decide what we’re going to do.”
At the same time, Croft decided to significantly increase the resources devoted to marketing. “We used to spend $6,000 a year in marketing,” Coon notes. “Now we have a six-figure budget for getting out, listening to our brokers and being more visible in the national conventions — including sponsoring several national conventions.”
Croft also gave Coon the go-ahead to hire a vice president of sales, Lee Martin. Martin’s experience, reputation and contacts enhanced Enterprise’s credibility and its connectedness, Coon says.
“Before the attitude was, ‘Well, what’s a salesman going to do for you?’ ” Coon recalls. “Fred said, ‘If you have the right guy and he’s doing what’s necessary, you’re going to get where you have to be. You need people like this.’ ”
One danger in increasing marketing and volume quickly is that it is easy to lose control of credit quality. So, Enterprise emphasized a model, which Croft was familiar with from his days running credit for an investment advisor, the key to which is experience rather than automatic scoring.
“We don’t do automatic scoring,” Croft says. “We have experienced analysts who look at every deal, and we talk about what’s good and bad about it. We try to never say no. And we see a lot of deals where we have to say, ‘Here’s our problem and how can we find a way to get around it.’ ”
Croft notes that Enterprise is doing quantitative credit analysis, but it isn’t credit scoring in the traditional sense. Enterprise uses it to make sure it is looking at the right variables, and to make sure Enterprise is making consistent credit decisions, which is very important to its customers. At the same time, Coon says, “the company’s goal is four-hour turnaround on all credit approvals, and unless we just happen to be getting slammed, we’re running two hours most of the time.”
Coon also points to Croft’s investment in company infrastructure — including human infrastructure — as crucial to the company’s growth. “IT investments, furniture, computers, telephones — all that can go in a category all by itself,” Coon says. “And we’ve hired very good people. He’s got a strategy in mind to continue to hire the very best people.”
In addition to Martin, one crucial hire cited by both Croft and Coon is Bonnie Whittles, a portfolio manager who spent ten years in the collections department at GMAC. “We’ve also got a half-dozen lawyers across the country, so we have lawyers on the ground who know the local laws,” Croft says.
While investing in marketing, an emphasis on credit and process, and infrastructure improvements were the most obvious things Croft did upon his arrival, he believes the most important element is cultural.
“I’ve always believed you have to have a really good relationship with your customers. By good, I mean that you have to build a relationship with them individually, listen to them and have fun. It’s an opportunity, not a threat, when a customer has a problem. They understand that everyone makes mistakes, and what they really want to know is whether or not you’re going to listen to them and then fix the problem. So, a problem is a chance to make a very strong, positive statement about our company and the way we do business.”
Croft adds. “When I came here, the company was small enough that everyone could have a close, personal relationship with their customers, and one of the reasons things have worked well is both our employees and our customers have discovered that I wasn’t going to take that away. I want to enhance it.”
Partnership With MagnetBank…The Laws of Attraction
MagnetBank is a lending-only institution, which opened in September 2005 with offices in Salt Lake City, Atlanta and Raleigh. Magnet approached Enterprise some six months later looking for a partner relationship.
As the relationship between the two companies has grown, they have found synergies in working toward mutual goals.
Industrial loan companies are trying to build loan volume without building expensive deposit gathering, credit and loan servicing infrastructure. Magnet is using Enterprise as a source of loans, and because they are comfortable with Enterprise’s capabilities, they are using their credit and servicing capabilities as well.
Fred Croft, CEO of Enterprise Funding, says the two organizations are trying to help each other access heretofore-unrealized opportunities. “One of the things we’ve been trying to figure out is how to move into areas where neither of us is currently well represented, such as loans from $100,000 to $1 million, where we can combine, rather than duplicate, our resources to offer a competitively priced product,” Croft explains.
Chris Worel, president and chief operating officer of MagnetBank, notes Enterprise was chosen because of its strong reputation in the industry, lease-lending expertise and commitment to providing superior customer service.
“Enterprise has an excellent track record of establishing lease relationships. Their processes and procedures are thorough, well-documented and efficient, which enables them to provide the same high-level of customer service that we are committed to providing,” Worel says. “We are excited about the opportunity this relationship provides for us to further diversify our loan portfolio mix by adding high-quality commercial and industrial leases.”
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