What an Entrepreneur Should Think About Before Choosing a Financing Company

by Jacob Semanco

financing company

There are many financing avenues you can pursue as an entrepreneur or small business owner. Making the right decision for you and your company is no easy feat, and the plethora of options out there doesn’t make the decision making process any easier. Choosing the right lender takes time, but in the end, it will pay off tremendously. There are a few key factors that business owners should consider before choosing the financing company they want to work with.

 

Relationship

Working with bigger financing firms may lead to additional resources, but this isn’t always the best option. For some small business owners, comfort is found in getting to know the company who is financing their business. There’s a certain element of trust that comes with working with a smaller firm. However, if you’re not the type of person who looks to build a meaningful relationship with your lender, then a larger financing company may fit your needs better. Whether or not you choose to work with a smaller or larger financing company not only depends on your business needs, but your personal preferences as well. The most important benefit of working with a smaller firm is that they have the ability to customize a solution that may provide you with the additional cash flow you need rather than a standard solution.

Price & Flexibility

The size of the financing company you choose to do business with is also important. There are advantages and disadvantages of both large and small firms, so it is important to know what you want to get out of the transaction. Larger firms are typically cheaper but have more restrictions. More often than not, their options are along the lines of ‘one-size-fits-all’. There isn’t much wiggle-room and if there is, it will cost you more. Meanwhile, a smaller company takes a different approach to financing your company. These firms make sure to take the time in finding the best financing option that fits your business needs.

Resources

A major difference between a large lender and a small one is the amount of resources they have. You might ask, “How does this affect my business?” Well, without having the support of a larger and more resourceful financing company behind them, a smaller financing company may not be able to lend you as much money as you need. Smaller firms are more limited in the amount they can lend out compared to larger firms. This is an excellent opportunity for the big guys to step in and do the heavy-lifting. It’s important to check how much a firm will be able to financing and grow with you. If the amount they can offer is not enough, then it’s best to move on to a bigger firm.

Experience

Over the past few years, we have seen a boom of Fintech companies. Fintech companies are online lenders that can support or even replace banking and other financial lenders completely. However, the technological age hasn’t totally taken over the finance industry and the traditional lenders are still around to help companies grow. The traditional path may be the best fit for you if you don’t feel comfortable with the new technology and are looking for a firm that has already established a stable presence. Sometimes, the old-fashioned way is the best way to go.

Customizable Options

Chances are if you go to a larger company to help finance your business, you won’t have the ability to customize your options. Larger firms tend to take more of a transactional approach to financing their clients. This can be great for entrepreneurs and business owners who are looking for a one-stop shop. The convenience and relative speed compared to smaller financing companies can quickly put larger lenders in the crosshairs of busy entrepreneurs. On the other hand, there are the smaller financing companies who get to know you and your business. Only then do they suggest the best option for your unique financing needs. Compared to the quick transactional approach of the larger lenders, the smaller companies take a more consultative approach. They make sure to fit you with the right solution according to your financial needs.

So, do you want to build a meaningful relationship with your lender? What’s your price range and how much cash do you need and when? Are you looking for convenience or need a financing company who you can trust to help you out over the long-run? These are all questions you should ask yourself as a business owner before meeting with a lender. Remember, there is no one size fits all when it comes to financing. Make the choice that works best for you and your company.

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