Preparing Your Business for the Capital Markets

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Preparing Your Business For The Capital Markets – Rapid growth for a small business owner is a dream come true. Increases in sales and potential new clients, increased revenues and future opportunities all lead to higher net income and expansion if the management can navigate the growth well.

Small businesses tend to use the Lessor’s application-only approach to fund the equipment necessary to keep up with their growth. These purchases are usually under $150,000 to $300,000. However, as your business grows and equipment needs increase in volume, as well as dollar amount, Owners, CFO’s and Controllers turn to larger Lessors or Large independents for funding.

Banks and Independent Lessors do not make a funding decision based solely on an individual beacon score. Billions of dollars in transactions for some fantastic projects get declined each year because small companies are not prepared to receive approval. Here are the top ideas for preparing your business for the capital markets. This advice applies to the business owner as well to educate their broker on the fundamentals of risk based approvals and the best practices that should always be used:

  • Have current “interim” statements completed so a lender can see no recent surprises or changes in the business.
  • Have year-end statements completed and accurately presented, so an analysis of your operations shows you have a business in control.
  • Have at least a one year forecast at all times so a lender can see a bright future from the eyes of an insider
  • Have prior year Tax documents completed (if you filed an extension, provide the copy)
  • Make sure that internal year-end statements “Foot” with your Fed Tax Documents
  • Have a completed Personal Financial Statement not older than 90 days – Sign the document which tells the lender that the owner or owners are “all in” to grow the business and willing to put their signature and guarantee behind the loan.
  • Vendor invoice and equipment details which will detail the type of equipment, expected value over time and reputable equipment vendors that will stand behind their product
  • A summary of why the equipment is needed and what it will do for the company to grow, enter new markets, expand territories or improve the bottom line
  • Not every company has perfect financials; if there are areas in your accounting that need a footnote or additional clarification, provide it. It will go a long way in helping a credit team see how your management team deals with issues that invariably arise in business.
  • You have spent a good part of your life building this business, BE PROUD OF IT, and why an investment in you and your company is a wise course for the financial institution.

Credit analysts are responsible for making approval or denial decisions on 15 to 20 credits per day. If all of your corporate information is not gathered and presented correctly, so if a question arises, they have the answer included in your paperwork, and automatic turndown is issued, the credit department moves on to the next transaction with all of their docs in place.

Golden Rule – Have all your documents together, present them at one time – put your transaction in its best light, and don’t make them chase you for additional clarification or missing and essential information.

We love all of the brokers we work with and, in particular, the unique, innovative, and often challenging projects they bring to us. If we can help our valuable broker network stage some of their deals just a little better, then we indeed have a win/win/win situation for all parties involved.

How have you set up your clients for success?

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