It's Not You It's Me - Guest Blog Lime Consultancy
23rd March 2015
It’s Not You It’s Me
Probably the lamest line ever used to end a relationship, and never a line that is used that often in business.
However, it is actually a very apt explanation to explain why businesses often fail to obtain borrowing or get turned down for lending when they least expect it.
The reason is that it is usually the lender not the borrower that has the problem.
The Business Lending Dating Game
Whether you realise it or not, when businesses prepare themselves to apply for finance they are playing a similar game to dating.
Think about it for a minute;
- Making an effort to impress
- Showing your best side and trying to find things in common
- Looking your best
Businesses do the same things. They have approached a lender because they think they are a good fit, they have probably been introduced or already have a connection with the lender. It really is a very similar game being played.
The difference is that many businesses never get to a second date, and usually for no fault of their own.
The Reasons Behind No 2nd Date
Put simply, the lender has little interest in the business at that time. It is no criticism of the business or how they have approached things, it is just that different lenders like different things and the two do not combine.
The main reasons for this happening are;
The sector you operate in
- What you sell or where you get it from
- How much you want to borrow
- How much of the total you need you are asking to borrow
- What security you have to offer
- How you want to repay the borrowing
- How your trading cycle works
- The difficulty for most businesses is that these factors are generally fixed and cannot be changed, which is why companies never get to the second date stage.
The problem for many businesses is that the lender will try to get the deal done. Under normal circumstances you would credit this approach, but what it generally causes is the dreaded slow death. Often the preferred option would be a quick no, that way we can all move on and form the relationships that will last.
How Do You Know Who Is Right For You?
The big question. The answer is that commercial lenders change their policies over time, you could apply now and apply in 3 months time, then get a totally different response for what is the same proposal.
It isn’t easy but there are things companies can do to about it.
The best tips for this are;
- Speak to others within your industry sector, who they have used, what they have done, how they went about it etc
- Ask direct questions of your lender, some example questions are here
- Summarise what you want, state what the minimum you need is. State clearly what your limitations are, normally these are; Your experience in the sector, the security you can offer to support the commercial lending, your company & personal credit standing, your past financial accounts
The key aim is to state exactly what you want, when you want it, what you can offer and be forceful in asking whether your proposal is one for the commercial lender. You may get a quick ‘no’ but it may be the best answer for you, it means you can look elsewhere and ultimately get a quicker ‘yes’.
When you go back to the dating analogy it is a case of ‘Don’t call me, I’ll call you’, sometimes you just know it is never going to happen.
By Dave Farmer
Dave Farmer is founder of the multi award winning Lime Consultancy, a commercial lending specialist working with SMEs across the South.