When a business is heading in the wrong direction, yes, you can see it coming. It’s not always obvious, but whether you are the borrower or the lender it’s possible to detect warning signs if you are looking for them. If your focus is solely on the current financial results, both parties may be in for a nasty surprise.
Current financial results can provide a great picture of what has happened recently, but they are often a poor indicator of what’s just around the corner. Rather, what is necessary is a deep understanding of what has made the business viable so far. If the elements that have contributed to its success begin to change, you must determine their potential impact going forward. Some of the elements that can negatively impact future results are:
departure of key employees;
management decisions to alter strategies regarding sourcing, pricing, and marketing;
capital asset expansion plans;
margin deterioration with no reasonable plan to fix;
technical advances affecting the industry with little management concern; and
revenue increasingly concentrated in a few customers.
These and many more elements need to be understood so that both the borrower and the lender can communicate clearly about what lies ahead. They can then work together to give the business the opportunity to remain viable and thrive in the years ahead.
Capital Access Partners is committed to advising its clients on the best lender to accommodate their long-term plans. We strongly believe in compatibility between lender and borrower. Compatibility is so much more important than the cost and structure of the capital. When a borrower’s circumstances change, whether for the worse or the better, it’s reassuring to know that the lender is compatible. That means the lender has a good working knowledge of the industry in which the borrower operates and understands in timely detail the circumstances of the borrower.
Our focus on “Optimal Pairing™” to achieve “Optimal Results” provides both parties with the confidence that their relationship will be satisfying and long-term.
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