Click here to get this post in PDF
Your SME business consultant can be your best buddy in challenging economic climates. But, as in any partnership, trust is crucial. This kind of partnership calls for honesty, mutual respect, and constant communication.
Update your SME loan consultant regularly and inform them how your business is progressing, even if you’re not looking to borrow money. Allow them into your company and have them see your operations at least once every year. Ideally, establish that harmonious relationship in good times to depend on it when times take a hard turn.
SME loan consultants are more responsive to loan applications from SMEs with which they have already established a relationship. Nevertheless, expect more extensive due diligence and a lot more questions and requirements, especially when the economy isn’t doing so great.
Getting business financing can help well-managed SMEs that plan ahead. Here are a few things to consider when preparing for a meeting with your SME loan consultant:
Decide What Kind of Money You Need
Is it working capital or long-term funding for fixed assets? Knowing what type of cash you need will determine whether you should be approaching a credit union, a bank, an equity investor, or other financial institutions.
Two or even more lenders are better than one. Part of your backup plan is to look for and plan additional sources of credit. If your company or business is large enough, budget your financing stream between different financial institutions. If you are smaller, divide your funding needs into shorter as well as longer terms.
In these instances, an SME loan business consultancy will be more useful. Loan experts who have established a strong working relationship with secure lenders would be your best bet to get one the kind of funding that best meets your needs.
Know the 5 C’s of Credit
Entrepreneurs should be aware of the criteria that the lender will use in assessing their loan application. They are likewise known as the “five Cs of credit.”
Character: Does your company have the skills, experience, and excellent record of delivery?
Capacity: Do you have the ability to pay back the loan? Banks and financial institutions will look at both your track record and your anticipated cash flow.
Capital: Is your capital base strong?
Collateral: Often mistaken as the only vital thing that a lender wants; the collateral is actually lower on a banker’s priority list than the other “Cs.”
Please Talk to Your Lender
Don’t be an outsider: always keep the communication line open. This involves meeting all reporting requirements of your business on a timely basis. Submitting your financial statements and pertinent reports late to your lender leaves an unfavorable impression.
Also, don’t go beyond your approved credit limit. If your business needs extra money, it would be better to talk to your lender regarding a temporary extension. And finally, be realistic about your short-and long-term cash flow projections and share this information with the lender. This might be used as the foundation for your credit line once it is needed.
Why SMEs need to track their expenses?
Do Your Homework
When financial institutions ask for additional paperwork, don’t worry. The lenders are in the business of borrowing money. Nevertheless, they are still going to do their due diligence to ensure that the money they’re lending is for secure business ventures.
It might also be essential to set up your business plan. Lenders often have to improve business strategies for clients before they could finance them. SMEs who make a secure business plan are more likely to obtain financing.
Run a Tight Ship
Not all companies can focus on routine work such as timely payment of bills, collection of accounts receivable, and inventory tracking. Financial institutions will want guarantees that you take care of those business fundamentals.
