Smart businesses look beyond today’s interest rates for a lender that can serve the broader interests of the company, according to GE Commercial Finance Corporate Lending President and CEO Tom Quindlen. Here are four key attributes Quindlen says small business owners should consider when seeking smarter capital and determining the right lender.

At some point, almost every small business owner will have to borrow money. You may own a manufacturing plant, a niche retail outfit or a restaurant — whatever it may be, you’re seeking capital to finance your business: to increase your inventory; to buy out your partner; to purchase a building or refinance an existing commercial mortgage; or to buy commercial real estate and quit leasing. It may be growth and the need for expansion that fuels the drive for financing. Whatever you own, the unfortunate truth is you need money to make money.

Taking into account the endless other pressures, challenges and headaches a small business owner face, borrowing money for your business is a serious decision.

“When financial markets are flush, lenders compete based on price or by offering covenant-light or even restriction-free loans,” writes GE Commercial Finance Corporate Lending President and CEO Tom Quindlen in a GE Commercial Lending white paper on finding the best lender (or via IndustryWeek).

In the long term, though, “smart business leaders look beyond today’s interest rates for a lender that can serve the broader interests of the company.”

The following are some key attributes for small business owners to consider when seeking smarter capital and determining the right lender.

Patient Capital
Does the lender offer various loan structures — cash flow, asset-based and structured — to accommodate changing circumstances in an ever-shifting economy?

Quindlen asks:

If your cash flow turns negative, will the capital provider show you the door or alternatives? A financier with a big balance sheet who can support a company’s peaks and troughs is typically more patient as markets ebb and flow.

Seek an established lender who can accommodate your future needs and who will stick by you.

Industry Acumen
With a lender who specializes in your industry, “the learning curve is shorter, the loan structures more tailored and the industry expertise often adds value and greatly facilitates the loan process.”

Wachovia Small Business recommends:

Experienced small business lenders know the products, parameters, eligibility requirements and documentation process. Smooth and quick processing of loan applications is contingent upon working with a commercial loan representative who knows the process and loan product intimately.

So look for financial institutions with genuine experts in your field.

Customer Focus
Participate in a proven program that measures customer service and customer satisfaction.

For instance, consider the net promoter score (NPS), in which customers are asked only one question, the so-called “Ultimate” question: How likely are you to recommend [Company or Product] to a friend or colleague?

(Developed by Bain & Company‘s Fred Reichheld, and discussed in his book The Ultimate Question: Driving Good Profits and True Growth, the concept is based on Reichheld’s research into the link between customer satisfaction, customer loyalty and profitability.)

The answers to the question “allow companies to determine NPS by simply subtracting the percentage of its detractors from the percentage of its promoters,” according to Quindlen. “Once you know where clients stand, you can improve what’s creating dissatisfaction and amplify what clients like.”

Whether it is NPS or another measure, writes Quindlen, search for a lender with a commitment to improve service continually.

Evolving Lender
Not all lenders can back your company throughout its lifecycle:

• An emerging company needs funds for capital expenditures, growth and working capital.
• As it grows, the company may need equity or financing to support mergers and acquisitions or project finance.
• When it reaches maturity, the company may need help with spin-offs, recapitalizations, securitizations and interest rate risk management.
• If the company hits a bump in the road, it may require corporate restructuring, debtor-in-possession or plan-of-reorganization financing.

Finding a lender that can evolve with your financing needs — throughout your business’ lifecycle — can allow you to focus on running your business.

In the long term, Quindlen notes, savvy business leaders should look beyond capital costs and search for smart capital — “a lender with depth and breadth of products and services who can serve for the long haul.”

Resources

Finding the Best Lender
by Tom Quindlen
GE Commercial Finance Corporate Lending

Republished as “In Search Of Smarter Capital”
by Quindlen
IndustryWeek, July 11, 2007

When Considering a Small Business Loan: Five Helpful Hints
Wachovia Small Business

60-Second Guide to Getting a Loan
SCORE

SBA Loans
United States Small Business Administration