Business Financing
Frequently Asked Questions

What are the most important elements of a business financing application for an existing business?

Accurately prepared and up to date financial statements (balance sheet and income statements), personal net worth, financial projections, loan collateral, and credit rating, both personal and for the business.

How much of my own money do I need to invest in starting up or acquiring a business?

This can vary tremendously, depending on the specific business your operating, your relative experience, geography, industry, etc. Most start up and acquisition situations require you to invest between 25% to 50% of the required capital.

How important is my credit rating to acquiring business financing?

Credit has some role to play in virtually all financing facilities, but the spectrum of how its used is very broad. While institutional lenders provide high reliance on credit reporting agency information, asset based lenders do not. But most asset based lenders still factor your credit reporting into their deal assessment and approval process.

How many lenders are there that provide business financing?

The number of lenders is very difficult to pin down as lending sources are always both entering and leaving the market.  It would be pretty safe to say the number is in the thousands when you consider all the sources of privatre financing, both equity and debt related.  At the same time, all lender models will focus on the key elements of a business (credit, colateral, cash flow, covenant, and control), but their dependence on each element can vary considerably from lender to lender.

Is Asset Based Lending a real option to consider?

Asset based lending is the fastest growing lending category for commercial financing as it allows a lender to develop a lending and risk management model more around the assets and industry and less around the overall context of a business.  This allows more money to become available in the market in less than ideal circumstances provides the capital for the primary business applications (startup, acqusition, expansion, consolidation).   Asset based financing models are definately something to consider when seeking financing.

How do I determine if an interest rate is too high for my business? 

First of all, the interest rate you can secure is a function of your financial profile and the type of lender you're dealing with. Some times the interest rate you are considering may be too high relative to alternatives due to the fact that while you have an "A" financial profile, you're talking to a "B" lender that does not provide optimum lending rates.  If the proposed interest rate is appropriate for your overall level of risk, then your focus needs to be less on the interest rate and more on the cash flow and return on investment.  If adding the incremental financing to the business results in a positive return after financing costs are paid, then the financing option and related rate is something to consider for your business.  If you can't reasonably expect to cash flow the business and yield a positive return, then the rate is too high for your business.

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