What finance brokers look for when choosing the right credit and banking provider for a business.
Structuring Business Finance is more complicated than many, including some accountants, realise.
In the most basic sense, money is a commodity, and in that regard, the product offerings between credit providers in some market segments have become increasingly similar.
Reputable finance brokers and bankers will always strive for good customer outcomes and be aware of the relevant policies and guidelines that provide the necessary framework to support borrowers.
In our experience, the structure and ongoing conduct of borrowings are usually more important than the selected credit provider. Therefore, it is critical to focus on identifying the needs of the business first, rather than jumping straight to choosing a popular credit solution or a specific credit provider.
Or, being purely enticed by an advertised interest rate.
Feedback from business borrowers shows that the following six factors are most critical when forming a Basis of Recommendations.
These factors are taken into account at varying levels, depending on the customer’s needs. They can be a helpful starting point when looking at options for building business lending facilities.
1. Term
How long is the initial loan term?
When does it need to be reviewed?
Short-term P&I or Interest Only? What is the basis for repayment of the debt?
What does the new cash flow position look like?
2. Pricing
How much will it cost?
What is the interest rate, and how is it actually calculated?
Be careful here - it isn't always simple to work out exactly what you are paying. Make sure you get advice if needed, especially when your interest and fees are made up of many components.
3. Flexibility
As things change or the business grows, is there future borrowing capacity to meet needs? You may already be at or close to your lending limits, which could impact your plans.
4. Covenants
Covenants are important and can actually help keep your business on track. Make sure you know what your loan covenants are and how you can stay inside them. Our Business Finance Guide may be useful to learn more.
Some lenders can frustrate business owners with qualitative demands or a thirst for endless paperwork. The amount of time required to manage the lending facility and meet ongoing criteria can be an important consideration for a business owner.
5. Services
These include Treasury, Foreign Exchange Facility, Trade Facilities, Merchant Facilities, etc. Are there specific additional services that you will need from a banking relationship?
Does the chosen lender have the expertise to deliver on these consistently?
6. Relationship
The quality of people and relationships is a critical factor for many businesses at the front and back end. Many business borrowers may be “low touch”, so the people factor is less of a consideration for them. For others, the banking relationship is a critical element and needs to feel right.
MCP Financial maintains connections to a diverse offering of business lenders. Let us assist you in finding the right fit for your business needs. Start here with our Commercial Enquiry Form.