The ongoing COVID-19 pandemic is proving to be difficult for many industries of the US economy. We’re seeing the impact hit a variety of different sectors, such as travel, construction, transportation and even finance.
In particular, the smaller, independent finance companies may face an influx of issues because not only are owners concerned about credit quality within their own loan portfolios, but they need to be confident that their lender continues supporting their company during these troubled times.
An independent finance company’s survival depends on having a readily available source of financing. If a bank’s appetite for credit risk tightens and financing is limited or cut off completely, the company’s ability to finance their own existing clients will be adversely affected. Additionally, new prospect opportunities could be limited as well.
Ongoing communication with lending institutions is imperative to ensure that financing will not be restricted. If there are hints of a problem, management should have an alternative source to finance their growth if the bank will no longer supports their needs. This is especially important during the current pandemic as it can take 45-60 days for due diligence, approval, and documentation of a new lending facility.
Understanding the Business
A small commercial finance company needs a lending partner who understands its business. They need to work with a lender who knows and recognizes how they operate and buys into their policies and procedures.
This is where an independent lender offering Lender Finance can be an advantageous resource. Small finance companies should choose an experienced lender that understands the ups and downs in the industry and isn’t quick to make decisions that can adversely affect the company’s ability to continue financing its own client’s working capital needs.
Those offering Lender Finance also tend to be more flexible with its loan structuring and decision-making when working with their clients. Take advantage of the lender’s experience and use them as trusted advisors when assessing credit and collateral risk. Lenders understand the importance of making quick decisions to meet immediate cash needs of its clients because their clients demand the same service. They may not be restricted by federal regulations or capital requirements that are required of large banks.
Our company offers a unique, personal perspective. Prior to partnering with Hitachi Capital America, our firm was a small, family-run independent finance company with a line of credit from a large bank. The Great Recession hit, and we were unable to increase our financing as we wished. We had clients looking for additional capital and a list of prospects in need of financing. However, we faced our own line limitations. So we’re being completely transparent and honest when we say that we understand the needs of small finance companies because we’ve been in your position before.