There can be some considerable differences how lenders operate in one local market compared to another. Local markets can be driven by one specific industry or be more diverse in nature. They can neighbor larger centers that are again narrowly focused on a core group of industries or more broadly representative of the market at large.
All these types of factors will have an influence on both debt lenders and equity investors.
Competition in the business financing realm is typically driven by lots of good business that can be done in a small area of concentration. The more competition, the more opportunity to not only secure financing, but to negotiate better rates and terms. Where competition is limited or sparse, it can be very difficult to not only locate any type of business financing at times, but the cost is likely going to be higher and needs to be factored into the equation.
And just because you see a nationally or provincially or state operated lending organization with branches and reps all over the place, don’t think for a minute that they are going to be applying some sort of generic criteria set or general appetite in all the different local markets they serve. Larger lenders that cover broader geography will typically divide their business according to local business market dynamics and have different rules for lending, different portfolio requirements in different areas.
Same bank, but very different rules.
As a business owner where location will be important to a business financing request, it is important that you become aware of what the business financing dynamics are in your market area. The same can be said for a business starting up or one looking to expand into another locale. Knowing the financing, lending, and investing dynamics for the industry and region ahead of time can save you a lot of pain and anguish in the long run.
And remember that whatever you believe you understand of these local dynamics today, the sands of business finance are always shifting so its going to be important to pay attention to any changes that occur in the local money supply so you’re not caught scrambling to either replace the credit facilities you already have or acquire additional capital for incremental business growth.
Sometimes there are under serviced areas of a region or country for more reasons than just supply and demand. If there isn’t a scalable source of capital around, it can hamper the development of any otherwise viable business opportunity.