Choose your lender carefully, it could be worth a lot of money to choose wisely.
When deciding on a lender that fits best with your business there are many pitfalls to be aware of. In reality, you have invited a silent partner into your business who is protected by legal documentation - ultimately giving the lender the power to take control of the business and placing you in a worse position than before, putting your assets and accumulated wealth at risk. Therefore, it is important that you choose your lender carefully and weigh up all of your options. It pays to shop around; look at the various lenders and the financing terms they offer. If you have a relationship with a bank, advisor, or other lender, you may take comfort from the existing level of trust in the relationship. This is particularly evident when negotiating terms such as price and lending covenants.
Each lender has their own niche and just like insurance companies you may be comparing apples with oranges. The banks can offer a variety of loan products that may be suitable to your needs, but banks are tied up in red tape with some credit decisions taking months. Non-bank lenders can offer more flexibility and greater speed of execution, making them a viable alternative to the banks.
One thing is certain: every Director should be comfortable with the level of commitment and support promised by the lender, equally at the start of the relationship as down the track at the end of the relationship when circumstances may change and the rapport becomes strained. There are no guarantees in business so think carefully about the choice of lender and consider the characteristics that are important to your business, such as:
1. Is the lender locally based with local decision making and accountability?
2. Is the lender committed to your market for the long term and reinvests profits into your market?
3. Can you find other business owners and financial advisors who are advocates for the lender?
4. Does the lender provide real value or just a cheaper price?
Determining the finance structure that best suits your business has never been more challenging; choose a lender who is recognised in your industry and takes the time to understand your business. This will allow you to get on with running your business and making your ambitions a reality.
