Business Financing Realities

“Proper Expectation, Process, and Focus Are Keys To the New World Of Business Financing”

I had two very similar calls this week from business owners in search of business financing for a project in their respective companies.

The individuals had applied for financing at a financial institution and had spent months now trying to get an approval so that funding could be put into place.

Both were now at the point where they were starting to run out of time and were now frantically looking around on the internet for either a replacement solution or a bridge financing solution that would buy them enough time to get the desired funding in place.

I also get similar versions of this call all the time and I don’t expect much to change in the near future.

The problem starts with a fundamental lack of understanding of where we are at in the financial and capital markets these days and how debt financing sources and equity investors approach opportunities.

Sources of money are more particular these days as to what they will provide money for and how long it will take to make a decision and get funds in place.

Business owners still believe that if they have a good plan and a good story that they will be able to locate and secure funding without much trouble. Their basic mindset is “how hard can be be…or…how long can it really take?”

While there are times that the process of business financing can go fairly smoothly, My standard advise to anyone that will listen is that the its going to take longer than you think and its going to be more difficult that you imagine. If its easier than what I have described, then that’s a bonus, and you’ll be much further ahead of schedule, but just don’t plan for easy.

In order to get success, the approach you take and the process you follow is going to be very important. If you don’t understand what that means, then you’re going to need to invest in some help from those that do.

As far as focus goes, this was the main point I made to both callers.

Both individuals sounded like they had a workable situation underway. The key at this point was to focus in on what was required to get an approval in place and do whatever was necessary to buy time and comply with the lender requirements.

Starting a new funding request with a new series of lenders where time was already short would likely only serve to divert time and energy from the deal they needed to try and complete.

Yes, it most certainly is frustrating when a lender or investor takes their time getting back to you, or continually asks for more information or third party work to be done to complete their funding assessment. When the people you initially spoke with that were so keen to receive your application for financing and to assist your business now seem to be taking an inordinate amount of time working through their own requirements, it can be excruciating, especially if you’re on the clock.

And sometimes you also have to know when things are not going anywhere and then make a course correction. But typically when things don’t go anywhere in the world of finance is due to some combination of 1) talking to the wrong financing sources in the first place; 2) not properly presenting the information in a format and level of completeness acceptable to the lender or investor; 3) not having proper risk management in place to secure the deal; 4) not having enough time for financing process to be completed; 5) not staying on top of all the individuals that need to contribute to the application.

Unfortunately for my two callers, as soon as they hung up the phone with me, they probably called the next listing they found and put in a call. In most cases they will be greeted by a marketing person who wants to take a look at their file and see what can be done. In both of these cases, based on the information I was provided, this would only serve to take precise time away from trying to make what they already had going work…even more so if they make a few additional calls.

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About the Author Brent Finlay