Your company is seeking financing options. How do you navigate conflicting lender perspectives?

Start by thoroughly understanding each lender's terms, requirements, and concerns. Evaluate the pros and cons of each option, including interest rates, repayment terms, and covenants. Communicate openly with each lender, providing clear and consistent information to address their specific concerns and highlight your company’s strengths. Consider negotiating terms to find common ground that meets your financing needs while satisfying the lenders' requirements. Use a comparative analysis to weigh each option against your company's financial goals and constraints. Finally, consult with your financial team or advisors to make an informed decision that aligns with your overall strategy.

Understanding the state of your current financials and comparing them to past statements to make sure you’re growing is crucial for any business owners. Most lenders will not care about projections unless you are applying for a start up loan or a construction loan. What they will care about is what has the business been doing recently. Here are the following things you want to know before applying that they will look at; cash flow and profitability, time in business, credit history, industry type, and use of funds. Based on these factors they will assign you a risk score as either low, medium or a high risk borrower and that will have either a positive or a negative effect on your loan terms depending on how you score out.

Before you approach lenders, you must thoroughly understand your company's financial needs. This means conducting a deep dive into your financial statements, forecasting future cash flows, and determining the exact amount and type of financing required. Consider both short-term needs, such as working capital to fund day-to-day operations, and long-term plans, like capital investments for expansion. A clear picture of your financial requirements will not only help you choose the right financing option but also position you to present a compelling case to lenders.

Once you know your use of funds and what you qualify for it’s time to match you up with the best lender to suit your needs. The lender that funds “your risk box” so to speak. Once you narrow down the financial institutions that will approve you it’s time to check reviews. After narrowing it down to a companies that have good reviews and will likely approve you based on your qualifications and needs it’s time to apply. You should be working with a dedicated loan officer of the institution itself or a broker that has a good relationship with them. After applying you’ll want to choose the lender that offers the best terms on their loan amount, length, interest and fees. That’s how you research and choose the right lender.

Creating a persuasive pitch is not vital in securing financing. They don’t care about what you have to say mostly, they care about your numbers. Your financial statements, tax returns, and bank statements from the last 2 years along with interim year to date ones will be the pitch. The numbers will tell your story for you. All you have to do is worry about a use of funds breakdown and what you’re going to spend the money on. Lenders like to know that the money they’re lending is going to be used on something that will help grow and enhance the businesses gross and net revenues. Showing a positive return on investment in comparison to the cost of capital is the best pitch you can give any lender aside from strong financial statements.

One thing most people applying for financing don’t realize is that negotiations need to start with realistic expectations on the borrowers part. Sure, there are predatory lenders out there but they are easy to spot. The credible lenders will either decline or approve your application based on cash flow, profitability, credit history, time in business, industry type and use of funds. If approved, your terms given will mostly be based on those factors. If declined, take a second to look at all those factors and ask yourself…if you didn’t know you, would you lend money to yourself? Good negotiation comes from knowing what you qualify for and knowing which lenders can fulfill that best. I recommend using a professional broker for negotiations.

When seeking financing, different lenders often come with varying terms and conditions. Negotiation is key to finding a balance that meets your company's needs while accommodating lenders demands. Start by clearly defining what’s non-negotiable for your business, and identify where there’s room for flexibility. Leverage the competition between lenders and aim for a win-win solution. Remember, it’s about finding common ground and securing a deal that benefits all parties.

I completely agree. Communication is key and will usually lead to you getting better terms from your lender. If you are shopping loans and have competing offers communicating that to a lender in competition to earn your business may convince their management that they should have been more competitive with their initial offer. Usually they will match or even beat the terms on the competing offer. Once you take the loan it’s important not to miss payments. If you do miss payments or know that you are going to miss one the best thing you can do is communicate that to the lender. If you don’t, they will move you to legal faster. If you do, they may be able to help you by lowering your payments or even pausing them for a short period of time.

Building and maintaining positive relationships with lenders is just as crucial as securing the right financing terms. Transparent communication, professionalism, and honesty can make all the difference. By keeping lenders informed and being upfront about your decision-making process, you not only build trust but also open doors for better terms and future financing opportunities. Remember, it’s not just about the deal it’s about the partnership.