Your business needs financing, now where do you turn? With numerous options for types of financing and types of companies offering them how do you know which will be the right one for you and your business? We have taken our many years of experience helping small to medium-sized businesses get the right financing for their business and put together five tips to help you find the right financing partner.

  1. What do you need the funding for? – First evaluate why you need the funding is it to help you cover payroll, supplier payments (AP), early payment discounts, to pay off another obligation or to facilitate growth for your business? You should also consider how much financing you need, what can you afford to pay and when you need to receive the funding.
  2. What types of assets do you have? – Did you know that you could put your assets to work for you to help you secure financing? The first step to see if this is an option for your business is to take stock of your assets including your outstanding invoices from clients in good standing, your inventory and your machinery and equipment.  
    There are a few key questions to address to evaluate if using your assets to secure financing could work for your business including are your assets currently pledged to another lender? Are your client’s commercial businesses with good credit, what are your selling/payment terms? This is important because a potential lender could recommend accounts receivable factoring which would turn your unpaid invoices, for commercial clients, into immediate working capital and with that they look at the creditworthiness of your client. 
  3. What is the financial condition of your business? – Asses the financial state of your business. Are you growing? Have you hit obstacles? What is the plan going forward?  Is there a story?  Is a commercial bank and option or are you in need of an alternative resource?  The best way to do this is to have accurate and up-to-date financials including your income statement, balance sheet, accounts receivable aging, accounts payable aging and possibly projections.
  4. Ask potential lenders questions – Not all lenders and types of financing are created equal. Each will have positives and negatives. You will have to evaluate which works best for your business. Key items that could affect your business that you should make sure to ask questions about include what are their fees? What are their terms and requirements? What do they require for commitments?  How much availability will they create?  Are they relationship lenders or more transactional?
  5. Experience matters – Make sure the lender you are considering knows your industry, wants to learn about your business and has experience working with other clients like you. This will benefit your business in many ways including getting a partner who knows the unique obstacles your industry faces and any unique regulations, laws or constraints that affect your specific industry.

The situation for each business is uniquely different and with that different financial solutions and lenders will be a better match for some than others. The key is to make sure you are looking at all the factors that could affect you and your business you find the options that best fit your business needs.