What makes a borrower smart and successful in their search for capital? At GE Capital, we drew on our experience working with thousands of borrowers and set out to answer that question. We also found that there are important variables beyond cash flow and credit history. While every situation is unique, these 10 tips are designed to better position you to get the capital you need for your business.
Reach out early:
The best time to approach a lender is before you need capital. Build a relationship and educate the lender about your business. A lender who believes in you and your business can be a powerful advocate during the underwriting process.
Treat your lender as a partner:
View your lender as a partner with shared goals, not as a vendor. Come to the table with an understanding of the lender’s perspective, be flexible and open-minded and look for mutually beneficial solutions.
Truth trumps, so be transparent:
You must be upfront. The real deal-killer isn’t negative information or financial setbacks. It’s having the lender invest time and resources only to find out you’ve provided information that is materially different from what surfaces during the underwriting process.
Tell a compelling story:
Every business has a story. Tell yours in a way that highlights successes and your knowledge of the market and demonstrates how you solved problems. Lenders understand that the downturn has impacted businesses. What they need to see is how you’ve overcome obstacles. Craft a forward- looking business plan. Finally, be sure the financial information aligns with the narrative.
Sweat the details:
Mistakes, even if they seem inconsequential, can cause a lender to lose confidence. Also, understand the key terms in your covenants, contracts and credit documents. Demonstrate your commitment by including a single document that specifies obligations and key dates.
Find a lender who knows your industry:
An industry-savvy lender will fully understand your business plan, competitive position and challenges, and can be invaluable as an adviser and advocate.
Ongoing communication is critical:
From day-to-day details to big changes, keep your lender informed. If an unexpected event occurs, such as an important executive’s resigning or a facility disaster, contact your lender immediately to discuss how your ability to meet your obligations may be affected.
Understand the process:
Reputable lenders won’t cut corners during the process, so don’t put them in a difficult situation by asking for things on short notice or expecting them to diverge from their established protocol.
Know your peers’ financing structures:
By taking the time to learn about the financing structures of industry peers in the region, you can improve the likelihood of creating a workable financing solution and demonstrate important industry knowledge.
Optimize cash flow:
Cash flow is king. Your lender needs to understand all monies coming in and out as well as your payment history and that of your customers. Better yet, show your lender exactly how you intend to increase cash-management efficiencies. Your lender also wants to see that you have sufficient cash to cover unexpected expenses or unforeseen events.
Tom Quindlen is president and chief executive of GE Capital, Corporate Finance and a GE company officer. The business provides a variety of loans and leases to midsize and large companies.
Jon Biorkman is vice president of GE Capital, corporate finance. Based in Denver, he and Doug Dent represent the business in the Mountain region.
