While shopping may or may not be your thing, shopping around when looking for a small business financial consultant is a must!
Some people like Christmas shopping. Others like shopping for a car. Many like to go shopping for footwear. Nobody likes to shop for money.
Yet, one of the most important decisions you will make as a business owner is how to and where to obtain capital. The process is time consuming and entrepreneurs never dedicate adequate time to do the research.
Often the prospective borrower looks for a quick fix. Taking the short route is not always the best route.
Shopping for funds may not be easy, but it is worth the effort if you are seeking to maximize the bottom line of the company. Expensive debt is hard to repay and will negatively impact both the balance sheet and the profit and loss statement of a company.
Entrepreneurs understand their business operations but they do not know how to select the right funding options and how to manage the process.
How do they decide where to “shop” for the right deal to match your funding needs?
How do you decide which is the best resource to match your funding requirements -a Federally Chartered Bank, a Regional Bank, a Micro lender, an Alternative Lender, a Savings and Loan Association, a Credit Association, a Factoring Company, a Payday Lender, an Angel Investor, a Venture Capital Firm, a Crowd Funder, a Private Investor, a Foreign investor, or perhaps a friend or a relative.?
If the demand for capital is required for business expansion, the first thing you have to do is check your personal FICO score and the Fico score for all owners who hold 20% or more of an interest in the borrowing entity. Every lender will ask you for a FICO score.
It is best to pull your own credit and provide it to the lender. Your credit score will in many cases determine your eligibility for various programs and lenders.. This first step will save you time and put you in touch with funding resources that make the process more efficient and more effective.
Debt or equity?
It you are considering equity should you seek a joint venture partner taking either a passive or active position?
Do you anticipate a long-term growth strategy or a short-term expansion program?
Should you consider convertible debt or an equity participation?
If you are considering debt should you seek a short-term line of credit, a revolving line of credit a term loan, a conventional loan, an SBA guaranteed loan, and which SBA program matches your needs?
Markets are regional and they are always changing. Some business models are hot in some locales and some are not. The same can be said of lenders and investors.
Some consultants know the process and can guide a client by doing nothing more than loan packaging. Other financial consultants have resources, but they depend on the clients to provide the information suitable to each funding resource.
Where should you go to get unbiased answers to your questions.
Do you have to pay for the answers before funding or can you work with a professional who is compensated for success? Try to find a professional in your market who is active in funding small businesses.
Do your research before you sign an engagement letter. Ask for references and check them out. This is one of the most important decisions you will make for the future of your business.
It is not as much fun as shopping for a car, but it is far more important to your success.