Investing in and nurturing commercial ventures comes with many complications and difficulties because business, by its very nature, is unpredictable. Subject to a range of external, often circular forces, small and medium businesses can be particularly difficult ventures.
To establish or expand their businesses, borrowers often turn to commercial loans, and invariably they look first towards banks and second-tier lenders. However, for the reasons mentioned above and more, these aren’t always the best option. So what should borrowers look for when choosing a third tier business lender? Put simply, you should find a loan company that has a reputation for responsible lending and that has the operational capacity and credit flexibility that comes from financial strength.
Financial Strength and Reputation
When looking for the right business lender, financial strength is undeniably important. In looking beyond the banks and second tier lenders, you are searching for operators that actually have the capacity to lend, in the time frame required, and that are not as rules bound and operationally hamstrung as the major corporations can be.
A well established and strong third tier lender can give greater consideration to the unique variables of your situation. This means faster approval times, less paperwork, and fewer of the credit barriers that often afflict small and medium sized businesses. When cash flow becomes a critical issue in your business success, these factors become crucial.
While the strength of your lender is essential, relationships and reputations are too. This doesn’t just refer to reputation among borrowers – though this is important – it refers also to reputation within the broking industry. You will only have the opportunity to work with reputable third tier lenders if you find them directly or if you access them through the broker community.
For this reason, a professional lender like Quantum Credit nurtures its reputation jealously and invests considerable effort in its broker relationships. This means that ultimately you will receive the best loan advice and solutions at competitive rates – whether working through your broker or dealing directly.
Flexibility and Understanding
As buzzwords, ‘flexibility’ and ‘understanding’ can represent almost anything, or even nothing. In a business finance context though, a truly flexible and understanding lender can really help an investor or business owner to achieve their goals.
Lenders need to make enquiries into your financial affairs, and they must understand your objectives and requirements. This means that to assist them in their due diligence you or your broker must provide a good understanding of the ‘context’ surrounding your application.
What all small and medium business owners need is a lender that will give them access to funds quickly - but only under the right circumstances. A competent application that enables the lender to gain a thorough understanding of your situation will lead to a loan that energises your cash flow without compromising your long term business prospects.
There is a fine balance though in developing a comprehensive understanding of your situation without an exhaustive diligence that actually might hamper your borrowing capacity. This is where flexibility meets understanding. Look for a lender who really gets the ‘context’ of your business need and then is prepared to work with you to achieve your goals.
Of course, both flexibility and understanding are built on a foundation of effective communication and so an early indicator that you have found the right commercial lender should come through in their style and approach to the processing of your application.
Your own due diligence
In your search for a quality lender, it’s useful to know their ownership structure and important to assess their track record and their reputation. The last thing you want is a loan readily given up front but which is from a lender that ties you up in onerous covenants and inflexible loan management practices. If it’s practical, meet your lender early in the process and find out about how they run their business.
Finally, if you’re working with a broker, get help there - they should be a key feed to your due diligence and to your selection of the right third tier lender for your unique business and investment needs.