Tag Archives for " commercial finance "

Action is Based On Urgency

It seems that in about 95% of the business financing cases I work on with business owners and managers, there is no action to secure a business finance solution without a certain amount of urgency being present.

On one hand, we can say that’s just human nature, that people in general require a sense of urgency or immediate need to take action.

But in the world of business financing, this is becoming more and more of a problem as lenders continue to take a more conservative approach in 2010 out the backside of the current recession.

The result is that debt financing is not getting secured in time to close deals, shore up cash flow, finance growth, and so on.  None of this is good for business owners or the economy in general.

Business owners and business managers have been conditioned to believe that getting a business loan of any size or structure can be done in matter of days or weeks.   So the process for even applying for financing has typically been delayed until the 11th hour.

The need for urgency is pretty much always required in that once someone makes the decision to pursue some amount of business capital for their company, there is a need to focus in on the process and stay dialed in until its completed.  Making a half hearted effort towards putting an information package together, not studying the financial metrics to demonstrate your business knowledge, and poor follow up and follow through on all requests for additional information can dramatically reduce the chances of success.

So while urgency and focus is a good thing, the timing of the action needs to be adjusted to achieve better results more often.

If we go back to the analogy of a clock and time left until money is required, business owners and managers have to reset their timing mechanism to not take action at the 11th hour, but at the 9th or 10th hour instead.

Perhaps its psychologically difficult  for many to develop a sense of urgency earlier on in the process of seeking financing, but this behavioral correction needs to take place in order to avoid greater financial distress when an appropriate source of funding cannot be located and secured in the time required.

Those that start earlier, with a sense of urgency, will get rewarded more times than not.

Click Here To Speak With Business Financing Specialist Brent Finlay

The Unpredictability Of Commercial Financing

I  got a call from a customer with not untypical cash flow management issues and was looking for more alternatives to try and solve his problem.

What I really liked about our discussion, is that this guy understood his business cold and could tell me instantly anything I asked during  my qualifying process on the phone, providing the information off the top of his head.

After this type of discussion, I never have any doubt that the client is going to be successful in their business because they have clearly been able to quickly and effectively demonstrate their intimate knowledge of what’s important as well as the things they are doing to grow the business and protect cash flow.

The challenges in this case was rapid growth and how to properly cash flow more sales, which is not an uncommon problem by any stretch with small business owners.

The business owner had also been surveying and studying his financing options in the market and had an above average grasp of where the capital markets are at and what types of options and financing structure where available to him.

Yet despite his above average knowledge level with respect to business financing and how the market in general would view funding his business, he still hadn’t been able to get proper funding in place, even though he’d been working at it for about 6 months.

This is becoming a more and more common theme in the phone calls I get these days.

The commercial financing market is not only hard to understand at times, but right now its almost impossible to predict.  And even when you have a business in a “finance-able” position with a totally on top of it business owner, there still can be a lot of art and science into the process of locating and securing financing that the business needs.

More specifically, deal positioning, deal timing, and financial support documentation are now much more critical to lenders than any time in recent memory.

And while I am confident that the caller is more than capable of figuring everything out on his own, how much more time can he invest in the process and how is that time investment impacting his growth strategy?

If you’re business is making money and the only thing blocking you from making more money is capital, the it makes a great deal of sense to pay for the expertise required to keep the business properly funded versus losing out on the future profits lost from mucking around with something that is not only difficult to understand at times, but almost impossible to predict.

Click Here To Speak With Business Financing Specialist Brent Finlay

customer called me to discuss options, had them figured out, but still didn’t know what to do

The Best Business Financing Deal May Very Well Be The One That’s Available

When anyone looks for financing of any type, they are intuitively looking for the best deal with the best rates, the best terms, the best fit for what their doing.

And many business owners will start out with their own set of criteria of what they are looking for in terms of amount of money and what the related terms and conditions need to be.

The challenge is then how fast their perception of what’s available to them can be lined up to the reality of the capital markets at any given point in time.

Let me explain.

At any given time, a business may be eligible for certain types of financing rates and terms, but what lending source can provide it?

When the overall market is operating during a period of sustained economic growth, more lenders will be providing similar terms on similar deals most of the time.

When the market is operating during a period of uncertainty like the current recession, the same financing opportunities can still exist for a given business, but its likely that there are fewer lenders that will provide the best potential deal at any given point in time.

The reason is that economic uncertainty increases risk and losses for debt lenders just like any other business.  And to protect themselves, some debt providers will leave the market all together for certain types of deals for a period of time, some will cut back, some will expand their criteria for approval, and so on.

The result of all this is that the ultimate best commercial financing deal can be very hard to find in times of greater economic uncertainty.

And when most financing requirements have some sort of time line that needs to be met, the best deal can very well be the one that can be approved and arranged in the time required.

This doesn’t mean what you can get a hold of is the best potential deal in all respects.  It just means that its a source of money you can make work in the time you have.

Searching for a better deal is always an option, but there are two things to consider with looking elsewhere.  First, you may run out of time and either miss out on the opportunity you’re looking at, or incur additional costs from the delay.  Second, if you are unsuccessful finding something better, there is no guarantee the first deal is still going to be available to you later, especially in strained economic times where lenders are known to change their minds or lending direction quickly.

Its a bit like the old “bird in the hand is worth two in the bush” saying.  Sometimes a deal that’s close enough to your requirements needs to be good enough, at least for the short term until more predictable options are available.

Click Here To Speak With Business Financing Specialist Brent Finlay

Have You Made Adjustments To Your Business Financing Positioning?

With all the changes that have taken place in the capital markets over the last 18 months, there is now a need to change the way that requests for capital are positioned with lenders and investors.

In the recent past, applications were primarily based on historical financial statements and a decent attempt at cash flow projections to support the request for additional or new business capital coming into the business.

But things have changed whereby there is a much greater demand by lenders and investors for the business owner and manager to put forth commercial financing requests that are more thoroughly supported by source documentation and spend more time on risk management than forward thinking marketing strategies.

From a lender point of view, we have moved into a commercial lending era of loan security, lender mitigation, and business risk management.  While there still is money available in the market for businesses to acquire, there is a great deal more work involved in convincing someone that you’ve thought through all the major risks that could impact the business going forward and have a plan to mitigate the risks either in a proactive or reactive sense.

In the past, a lot of the details which have always been important to a business financing deal were glossed over by lenders or investors due to the strength of the economy and the unlikelihood of many types of risk to be of an issue or concern to many business owners.  This saved on the due diligence process and was supported by decades of portfolio analysis that identified what areas of risk a lender or investor needed to focus on the most.

With the impact of the current deep running recession, most of that logic is thrown out the window as its a little more of an every man for himself type of world where the business owner now has to actually think about all the things that could go wrong in advance of asking for money.

In my opinion, it the financing world had taken more of this type of security and risk first approach years ago, the current recession would not have run so deep.  But in better economic times, everyone wants to get in on the lucrative capital financing markets so lenders develop more aggressive portfolios to get their share of the growing pie.

But things are different now.  Lenders and investors have made the necessary adjustments, which are akin to their survival as viable business organizations.

Unfortunately, for the most part, business owners have not adjusted the way they manage their business from a financial risk point of view and as a result their business financing positioning when asking for new capital can be way off the mark.

Its really a return to good solid business fundamentals that we are seeing in the market.  Over the long run, this should be a good thing.  In the short run, it looks more like pain and confusion to those trying to locate and secure business capital.

Click Here To Speak With Business Finance Specialist Brent Finlay

Business Financing Hypocrisy

From both a borrower and lender point of view, we are seeing more of what I call business financing hypocrisy.

Lenders are interested in your business until they’re not interested in your business at which time they will call demand loans, cut back on lines of credit, term out lines of credit, increase interest rates, and invoke whatever get out of jail free cards they may have build into their funding commitment to the business.

Borrowers are just as bad in that they at times will promise everything but the moon and the stars to make the lender comfortable with a capital request, but when things don’t go according to plan and loan obligations can’t be met, the borrower calls his or her lawyer and tries to come up with a legal strategy to basically get around having to honor his or her promises.

When the economy is going well, these types of scenarios are played out very infrequently.  But when a recession hits, as it has for the past two years, business financing hypocrisy is everywhere and its every man or woman for themselves.

The net result of this type of two way hypocritical behavior is that the financing markets are slowly down to a crawl in many sectors and geographic regions.

Lenders are asking a lot more to protect themselves with most commercial financing decisions now focused on asset based security and risk management.

Borrowers try to protect them selves by constantly looking for a better deal as they don’t like the changes in lender requirements and search for someone who is more in line with their expectations.

To say there is a lack of  trust from both sides overall would be an understatement.  In tougher economic times, most people tend to take a more conservative approach.

For the desperate borrower, its basically a take it or leave it market with the lender setting out what they are prepared to do without really any flexibility.

For better deals, borrowers have become more patient as lenders are having trouble hitting their borrowing targets which is the way they make money.  So for good deals, there is a high level of competition and as a result, a patient borrower can find some pretty good deals as lenders cut margins to only secure solid opportunities.

But regardless of who is in a position of strength or weakness, promises made by either side are very weak.  Business financing has become a game where borrowers have to become better players to keep up with the changes in the capital markets.

If you have a business financing requirement or problem you need assistance with, give me a call and we can go through it together.

Click Here To Speak With Business Finance Specialist Brent Finlay