By Amber Colley
Strong lender relationships can be especially important for cyclical small businesses like in the swimming pool industry. Because cyclical business owners need to keep their business afloat during off-seasons, some may need to seek outside funding. Businesses have a variety of funding options, from online lenders to traditional lenders like banks. In general, traditional lenders tend to offer more favorable terms and conditions but offer fewer small business loans. Although there is no magic formula for how to win a traditional loan, there are ways to lay the groundwork for the funding you need. Start to build a strong relationship with small business loan officers to help establish your credibility on a personal level.
Getting Your Foot in the Door
Building a relationship with a lender means approaching him or her long before you need your loan. By meeting with a lender from the get-go, you can involve them in the entire process and they can better understand your needs. By the time you actually need funding, your lender will have gotten to know you, your business and your needs. Lenders want to feel confident they will be repaid, so it’s all about building that relationship.
If you wait too long to approach lenders, you may not get funding when you need it, or you may have to pay higher interest rates on a short-term loan to hold you over. Cyclical businesses appear to be higher risk because of the variations in their cash flow, but if your loan officer understands your businesses cycles, they may feel more confident lending to you.
There are various ways you can establish a point of contact with a lending institution.
• Request an appointment with lenders
at the institution of your choice
• Meet one-on-one with lenders at an Access to Capital, SBA, chamber of commerce or other event
• Utilize small-business development centers
• Reach out to your network for introductions
Once you’ve got your meeting setting up, gather all the information your lender will want to know, and bring it to your appointment. You’ll need things like: financial history; market analyses; a strong business plan; projected sales; your business credit report; and any additional documents specified.
Review this lender checklist before heading to your appointment. Lenders want to see these documents to not only fully understand your business and help you get what you need, but also to judge whether you have a firm understanding of your business, your customers, your strengths and your weaknesses.
Set up more than one meeting with your lender to continually check in as your business grows or changes. Consider keeping your representative in the loop if you make significant changes to your business plan or model so they can better assist you.
More Than Just Scores & Ratings
You will usually need strong business credit to get a business loan, but you shouldn’t rely solely on your scores and ratings.
By building an actual relationship with your loan representative, you help them feel confident you will repay your loan in ways that scores and ratings alone can’t. Once you’ve shown you can effectively pay it back, they may be more keen to lend to you in the future, which can set you up for an easier loan process down the road, and possibly better terms. Having a go-to loan officer who trusts you and knows your business can be crucial for cyclical businesses.
Planning for the Future
Cyclical businesses tend to be more likely to seek funding more than once, and if you have a strong relationship with your lender, you may have a much easier time securing funding a second or third time. Building a relationship with your loan officer can help him or her better understand the risks and values of lending to a cyclical business. It may help you if your lender understands that your valuation and cash flow will change, and it can help them as well: Many clients in cyclical industries become a lender’s best customers when they know the lender understands the risks, and supports the company in both the peaks and downturns. Without a strong lender relationship, your cyclical business may appear more high-risk than it actually is, and that could hurt your chances of getting funding. Take the time to build a relationship with your lender, and you may find the support you need during all points in your business’s cycle.
