Businesses that are growing need healthy cash flow and access to capital. There is literally billions of dollars currently available to assist businesses experiencing growth.
For Consultants, when you are contacting a potential Client don't be to quick to zero in on a specific financing vehicle such as, factoring their receivables. Ask some general questions to begin with:
"Is your business growing?"
"Do you expect your business to grow this year?"
"Will you be looking for financing to assist the growth of your business?"
"What accomplishments will come from an infusion of capital?"
Consultants, you should be looking for yes answers, and positive responses. By
asking better questions, you will get better answers.
If you are focused on only one aspect of financing, or if you aren't listening to the Client, you may miss what the Client is really telling you. They may want a business loan and only qualify for factoring, but let the conversation move you and the Client there. Don't start by insisting the Client listen to your preplanned presentation on factoring.
Be relaxed and be truly interested in what Clients have to say. Be a good
I personally have had Clients who told me "no" early in the conversation, but
within minutes revealed they did have a need. I was able to fill the need and earn closing points ($$) by having a "no pressure conversation."
A business is usually the largest asset a person will ever own, and it is unlikely
they will be pressured into financing if they don't want it. Professional Finance Consultants should provide educated, and relaxed conversation. It is ethical to persuade a Client through educated
answers and a sincere desire to provide the Client a solution. You never want to use pressure techniques, or anything that will distract from your professionalism. (In the near future, look for more
information on persuasion in upcoming updates of Business Funding
If the business isn't growing, and they aren't looking for financing, the prospect
may not be a candidate for your valuable time. Even if they aren't looking for financing today, if the Client is willing to talk, do spend a few minutes building rapport - they may need you in the
future, or they may know somebody else who needs your service.
Clients, when you are looking for financing, you need to have open conversations about what you are really trying to accomplish. Many clients will make simple Funding Requestssuch as $3-5,000,000. This immediately disqualifies you from getting to the next step. If you need $3,000,000, a lender is not going to provide an extra $2,000,000 for you to spend freely. Your Funding Request needs to be specific, so the Consultant can direct you to the financing that fits your needs.
Often a Funding Request needs to be broken down into separate categories, because they will be funded using various types of funding vehicles such as, real estate financing, equipment leasing, and working capital. This is why a Consultant should not start a conversation by asking if the Client, "wants to factor their receivables," because most of the responses will be "no." Factoring may actually be what the Client needs, but the conversation and initial documentation will reveal what financing vehicle fits the Clients needs. Starting a conversation with, "Is your business growing, will you be pursuing financing to assist that growth," will get more positive responses.
When there is a Client who has a business in a growth stage understand that
business loan requests of $100,000, or less, are typically best handled at the local bank where the Client has a banking relationship. The banker can quickly analyze the businesses banking history,
personal and business credit, etc.
Retail banks typically do not fund start-up businesses. Banks want to see at least 2 years of industry experience, and a sales track record of 2 years or more. This of course eliminates start-up companies. New companies can receive loans from the local bank, but the funding is going to be personal loan such as an equity loan on their house. (more on Start-Ups, Angel Investors, and Venture Capital in upcoming issues Business Funding Secrets.
Since most start-up businesses cannot receive funding from a bank even with a
personal loan, they go to the Internet looking for start-up capital. Consultants are bombarded with requests for start-up capital. Consultants you need to value your time. Most of these deals are
from daydreamers. They can't be funded, and as always, spend a few minutes in polite conversation with the prospect, but don't commit your time to a deal that will never get funded.
Business Loans require the Client to be prepared with good documentation including financial statements, tax returns, and a quality business plan. Cash Flow Projections, showing the ability to service the debt need to be based on sound reasoning, and demonstrate that the plan fits within the basic model of the industry. Lenders need to have a comfort level that the loan can realistically be repaid. Anything over blown is going to be looked at questionably and may eliminate the Client from receiving funding.
There is an old banking adage that says, "Banks only lend money to people who don't
There is some truth to this. Start-ups, business with declining sales, or companies
having financial difficulties find it extremely difficult to find the capital they need. On the other hand, businesses experiencing growth do need additional capital, but they have the sales track
record to provide the comfort level, which the lender is seeking.