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Comment by alarm industry lender about borrowing
May 21, 2021
Comment by alarm industry lender about borrowing from article on May 7, 2021
          I would like to respond to one of your recent newsletter posts, “What Does My Alarm Center’s Bankruptcy Mean?”.  In your comments you say, "Alarm companies who borrow money need to be very careful about the lending terms.”  This is essential advice.  Another piece of advice I would offer is, “Be careful how much you borrow.”  This may sound counterintuitive from someone who makes loans, but the biggest problem we see is when companies get over-leveraged, or have too much debt in relation to the value of their assets.  I don’t have any more information about the My Alarm Center debt reorganization than any of the rest of the public, so I can’t say that over-leverage was the case there.  
          But in general, there is nothing inherently wrong with business debt; it’s how most companies in most industries grow.  The key is keeping that debt at a manageable level.  At AFS, we do very low leverage loans, often frustrating potential borrowers who would like to borrow more.  Maybe that explains why we’re a small lender, but it may also explain why we’re the industry's oldest lender.
          Thanks, as always, for the important forum you provide.
Jim Wooster, Jr.
Alarm Financial Services, Inc.
866-204-9350 ext 1200
415-509-4750 cell
          I cannot emphasize enough how important it is to read the fine print on the loan documents.  If you don’t you can literally be making a deal with the devil.
          It’s one thing to borrow money and expect to pay it back with a set interest rate.  Once you have the terms of lending clear you can reasonably expect continued advances as long as you are making your payments and complying with the loan requirements; that’s the rub; the loan requirements.
          The loan requirements may sound simple, and they may be, but they also may be well beyond your comprehension and onerous. You may know what you’re in for at the loan application process when you’re informed that you’ll need to hire a different CFO, one approved by the lender who can prepare and generate the reports the lender will be requiring.  Never mind that the reporting, as well as the additional compensation, is a drag on your operation. Then, you have a poor quarter; maybe lose more accounts than usual.  The lender lets you know you’re out of compliance with the loan requirements.  Next thing you know the lender has jacked up your interest rate, maybe installed a few “consultants” to help you run your business.  Never mind that the consultants’ experience is best described as destroying alarm businesses, either intentionally or because of gross negligence, not to mention their exorbitant compensation during the process.
          Of course some measured borrowing is appropriate to grow your business or further your business interests; just be careful.  Doing business with a lender familiar with the alarm business is a smarter idea and AFS is a great resource for the industry.  If your borrowing requirements are too much for AFS to handle then be careful, and that’s the best and vaguest advice you’ll get today.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
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