First Community Financial is a small business lender that specializes in asset-based lending and factoring for a primarily small-business clientele. First Community’s business is generated by high-growth companies in diverse industries, whose capital needs will not be met by traditional banking institutions. First Community Financial will lend in amounts up to $1 million, so its focus is on small business. Since many of the loans that it administers are viewed by many banks as high-risk loans, it is important that the sales staff and loan processors have a solid working relationship. Since the loans and factoring deals that First Community finances are risky, the interest that it charges is at prime plus six percent or sometimes higher.

First Community is a credible player in the market because of its history and the human resource policies of the company. The company invests in its employees and works to assure that turnover is low. The goal of this strategy is to develop a consistent, professional team that has more expertise than its competitors. Whereas Jim Adamany, president and CEO, has a strong history in the industry and is a recognized expert in asset-based lending and factoring, First Community has one of the youngest staff and management teams in the finance industry. In the banking industry, promotions are slow coming, because many banks employ conservative personnel programs. First Community, however, has recruited young, ambitious people who are specifically looking to grow with the company. As the company grows, so will the responsibility and rewards for these young executives. In his early thirties, for example, Matt Vincent is a vice president; at only 28, Brian Zcray, is director of marketing. Since First Community has a diverse product line, it must compete in distinct markets. Its factoring products compete with small specialized factoring companies. Factoring is a way for businesses to improve their cash flow by selling their invoices at a discount. Factoring clients are traditionally the smallest clients finance companies must serve. Education about the nature of the product is crucial if the company is to be successful since this often is a new approach to financing for many companies. First Community’s sales staff is well trained at understanding its product lines and acts as the client’s representative as they work through the approval process. To assure the loans or factoring deals fit within the risk profile of the company, First Community must ask many complex financial questions. Many small businesses are intimidated by credit officers, so First Community handles all of these inquiries through the business development officers. The business development officers, in turn, must understand the needs of their credit officers, who are attempting to minimize risk to the company while maintaining a friendly rapport with the client. By centralizing the client contract through educated sales representatives, First Community is able to ask the hard financial questions and still keep the clients interested in the process. A potential customer can easily be discouraged by a creditor administrator’s strong questioning about financial background. Utilizing the business development officers as an intermediary reduces the fear of many applicants about the credit approval process. Thus, a sales focus is maintained throughout the recruitment and loan application process. Internally at First Community Financial there is a continual pressure between the business development staff and the credit committee. The business development staff is focused on bringing in new clients. Their compensation in a large part is dependent on how many deals they can execute for the company. Like sales staff in any industry, they are aggressive and always look for new markets for business. The sales staff sells products from both the finance department and the factoring department, so they must interact with credit officers from each division. In each of these groups are credit administrators specifically responsible for ensuring that potential deals meet the lending criteria of the organization. While the business development officer’s orientation is to bring in more and more deals, the credit administrator’s primary goal is to limit bad loans.

Review Questions 

1. What coordinative mechanisms does First Community use to manage the potential conflict between its sales and finance/auditing functions?

2. What qualities should First Community emphasize in hiring new staff to ensure that its functional organizational structure will not yield too many problems?

3. What are the key types of information transfer that First Community needs to emphasize, and how is this transmitted throughout the firm?

4. Why might a small finance company have such a simple structure while a larger firm might find this structure inappropriate?