By: Frehiwote Negash
DealNet Capital Corp. (DLS:CSE) announced Thursday that they have closed the first tranche of its senior secured debenture offering. The offering was initially announced on December 12, 2014. All funds raised thus far will be available immediately to One Dealer Financial, DealNet’s wholly-owned subsidiary and will be used to finance the consumer leases for the company’s HVAC operations. A sole investment of $3 million was made by a wealth management branch of one of Canada’s biggest life and health insurance companies with the option to invest up to $50 million through this offering. The commitment made by the insurance company is an encouraging sign for investors looking at the company as DealNet Capital expects to attract more institutional investment with their foray in the HVAC industry.
Under their subsidiary, One Dealer Financial, DealNet will provide financing and services to dealers as well as offering water heater rentals to consumers. Smaller companies in the HVAC space are less likely to receive assistance from financial intuitions that are already reluctant to invest. In this sense, DealNet has created a niche market by offering their expertise and enable these dealers to compete in a market controlled by a few players. The company will provide small dealers with loans and the use of its facilities to help expand their businesses. By identifying the need for these types of services in the HVAC industry, DealNet Capital has the opportunity to tap into an under-serviced market as small companies particularly those in the Ontario need and welcome companies that can offer a full range of services. There are currently 4 million households that rent their water heaters in the province with the majority of that market share held by a handful of providers and are squeezing out smaller players. That means fewer options for consumers to choose from and makes it difficult for smaller companies attempting to service the market and gain traction on their bigger competitors. Expansion into the American market is defiantly a part of the company’s plans – especially when you consider that there are 84 000 dealers in North America in the HVAC market making it a lucrative business opportunity.
With the closing of the first tranche, DealNet Capital is one step closer to opening up that market and providing the consumer with more options and dealers with the ammunition to compete in the space.
Source: DealNet Capital, Small Cap Power, Proactiveinvestors.com