It seemed that in 2009, business owners to a large extent were not in search for capital for projects or opportunities and were collectively weathering out the recession storm. Even when there was an opportunity to expand or get something done, willing lenders were difficult to come by.
In 2010, considerably more people are trying to get something done that requires debt financing, but lenders are still taking a very conservative approach to the market, bringing the process of business financing down to a slow walk or even a crawl in many cases.
What does this mean for business owners?
First of all, there is money available for business financing deals. But the process is likely going to take longer than you can imagine, so be prepared and start looking for financing sooner or further in advance.
Second, the devil is firmly in the details as money is flowing to those with business plans and commitments that are well ironed out and defend-able. So if putting together the deals is not your thing, then you should seriously look at getting third party assistance to not only develop a comprehensive proposal, but to also make sure that the positioning is appropriate in the current market place.
Third, forget about where the prime rate is at. Spending too much time chasing prime plus one money is likely not going to get you anywhere. If the only way your project will work is with prime plus funds, then make sure you’ve got lots of time to pursue the cheaper money. Even for solid projects right now, there is something of an economic risk premium added into most commercial rates.
Fourth, consider alternative financing sources. If there is sufficient margin in the project or business opportunity, then a joint venture or higher priced asset based loan may be what is the best fit in the short term. Cheaper money can always be pursued over time after the investment has been made.
Fifth, don’t expect any favors from your banker. Banks will tend to try and help their own customers first with expansion and growth plans, but it also doesn’t even remotely guarantee that they will be able to help you out.
If you want to increase your probability of debt financing success, then give me a call and we can discuss whatever strategies best pertain to your requirements.