When you’re in the process of trying to locate secure business financing, make sure that you’re prepared to get into the details related to your request right off the bat in order.
The reason is simple.
Because the business financing market can be fairly fragmented, its important to be spending your energy and time working with lenders or investors that can actually help you.
Too often, business owners will gloss over the details thinking that they may not be required to get the financing they are looking for.
Well here’s a news flash… the details are going to be required 95% of the time. And of the 5% of the time they aren’t required, most of the time you’re looking at some sort of financing scam that is more promise than substance.
When I speak of the details, I’m taking about full disclosure of what exactly you’re looking for and the credit and financial profile of your business.
Too often, little details will be missed on purpose because a business owner is trying to hit the warts of the business. But in the end, these items will come to the surface and can kill the deal after considerable time has been already spent.
This is also a problem when working with business financing consultants.
A business owner may gravitate to the financing consultant or broker that is asking for the least amount of information in the hope that he has some sort of special access to funds that can avoid having to do the Full Monty on business.
This is a tactic by some brokers to get you working with them. Later in the process, when you get annoyed with their false promises, you may likely just stick it out and go through the real process with them instead of starting over with someone new. And because business financing placements are usually one off transactions, the broker or financing consultant doesn’t have to worry about losing out on repeat business that likely wouldn’t happen anyway.
Banks and institutional lenders can also be guilty of asking you for bits of information at a time, pretending that they’re not going to ask for everything eventually in order to get you going with their application process.
And when I talk about asking for everything, I mean at least three years of completed accountant prepared financial statements, the current year interim statement supported by A/R, A/P, Inventory, and Equipment sub ledgers, transactional details to support margin levels, two to three years of financial projections, income tax statements, notices of assessment, government remittance histories, personal net worth and credit profile, and so on, and so on.
Even though its a bit of a pain to go through the details a number of times, its far more fruitful most of the time to sit down with someone and spend an hour providing a very detailed picture of what you want and what you have, so that they can provide you with more honest and immediate feedback as to the potential that they can help you or not.
Unfortunately, most business owners AND sources of financing do this onion peeling approach where the information is revealed bit by bit.
If you’re talking to the wrong source of financing, this can be death by a thousand cuts. If you’re talking to the right source, late disclosure of certain things can cause problems getting funding completed later on in the process.
The investment in time in the beginning of the process is a may me now or pay me later type of thing.
By investing time up front, the overall process is likely going to be more efficient because you’ll be working with the most relevant sources of business financing sooner versus starting the process over and over again with unsuitable dance partners.