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According to Gilkeson, many business owners are missing out on crucial funding by approaching discussions with lenders in the wrong way.
To assist, he provided four key areas lenders will consider in the application:
- Tell the story: A business is more than numbers and cash flow projections. What are the strategy and goals of the business, and what measures are in place to support these?
- Risks: What challenges are ahead, both major and minor, and what is the business strategy to manage them?
- Opportunities: Is there a potential acquisition on the horizon or potential buyer if KPIs are reached? Highlight the business opportunities, even if they’re not yet realised or some way down the track.
- Don’t hide bad news: Whether it’s a forecast tax debt, an unpaid supplier, or past negative media coverage, be upfront and explain the situation, how it happened, and what steps the business has taken to ensure it won’t happen again.
Gilkeson urged operators pursuing financing to consider these four areas and said it could make a significant difference to the approval process.
Lenders will often have a checklist of documents that are needed to approve a loan request. But those who go above and beyond by providing extra context stand a better chance.
This extra information may not be asked for, but can help in getting a deal over the line.
This doesn’t just relate to major lenders either. According to Gilkeson, non-banks are increasingly seeking context from borrowers.
“While non-bank lenders might be more willing to take a chance on entrepreneurship and innovation than traditional banks, you have to bring them on that journey and allow them to see the complete picture of what they’re funding,” he explained.
Gilkeson urged SME borrowers to think of lenders as their business partner.
“They’re not gifting you the money, they’re a partner in debt and want to know the business is successful enough to have the money repaid,” he said.
Despite the importance of transparency, there can be instances of oversharing. Gilkeson said it’s important to provide quality over quantity.
“We’re not saying send in pages and pages of fluff. You need to take the time to present the right information in the right way so the lender has a clear and complete understanding of your business, and what that extra finance will be used for,” Gilkeson said.
Those who simply see the loan application process as a box-ticking exercise could end up being turned away.
Borrowers who provide a holistic snapshot of the business are equipping lenders with all the relevant information and could turn a no into a yes.
Gilkeson said some inclusions, such as cash flow projections, sensitivities of the business, and providing an analysis of opportunities and the key risks, can sway a lender in the right direction.
“By laying out all the information, the business is usually able to ‘zoom out’ and see a more holistic and long-term picture, which can help identify efficiencies and other opportunities,” he said.
“If you don’t know what those gaps are, then you don’t know what you’re missing.”
Related: Lender appetite for SME loans surges]
