In my first post of the year, I’ve decided to tackle the issue of communicating with potential lenders. So many business owners get this wrong! I’m referring to their approach to getting working capital. There are many aspects to this, such as asking for the wrong kind of funding, but today I want to focus on the basics of communicating with lenders. Here are some recommendations – whether you’re talking to a bank, a leasing company or an alternate lender. Spoiler alert – it’s pretty basic stuff…
- Don’t ghost them! I will never understand why I have to say this, but rudeness will never win anyone points. If you don’t have time to get the documents together for two weeks, tell them. If you found another solution, have the ______ (your choice here) to tell them. If you don’t like them or their policies, tell them that (nicely) too – and why – so they can learn how to improve.
- Related to the first point, be prompt in responding to their questions and requests. You aren’t their only file, and they’re probably busy. Getting them information in a timely manner will keep you top of mind, and keep your file moving along (without having to repeat yourself twice)
- Think ahead. These days you need a cash flow forecast. It should tell you approximately when you will hit a crisis. “A hope and a prayer” is not an appropriate way to run an organization. You have families relying on you getting them prompt payment for their mortgage and groceries. My wife reminds me regularly that rush requests for financing have usually led to dead ends and ghosting (see first point!). By not thinking ahead you end up associated with the wrong crowd (of potential clients), making “yes” from your lender either less likely or impossible due to the inability to accomplish an unreasonable timeframe. With our company, try to plan for three weeks from submission of application to funding – for us that would be ideal, but we can also work much more quickly when you practice #2 above.
- Know what you’re saying (aka know your business). “I don’t know how much money we’re making”, “we don’t have a financial projection”, “I’m not sure who our target customer should be”, “we don’t get accountant prepared statements” – these types of answers all make approving a deal tougher, or impossible.
Hope this helps – practice good “communication hygiene” and know your business so that your lender can believe in you and your business the way you do. This will increase the chances of getting the working capital you need for that next leg of the entrepreneurial journey.
My thanks to Graham Eastham at BDC Calgary, as it was a conversation with him that led to this post.
