We Anticipate Problems to Create Solutions

Our Process Anticipates Problems, Creates Solutions

The good news is that Banks are lending again on a limited basis for non-disaster loan requests.  The bad news is that the loan products are limited and the underwriting guidelines are very, very restrictive.

Many industries/businesses are excluded from loan programs.  Banks simply cannot determine yet the viability of the businesses to survive the pandemic. Risk is too high and thus doors to the lending vault are tightly shut.

Today we spoke to a Bank on four different loan scenarios. Each of these businesses has challenges on their loan applications of different sorts, whether it’s credit, cashflow, type of business, COVID-19 impact on the ability of the business to earn income.

In the hour-long conference call with the Bank, thanks to our qualification process here at Aurora Consulting, we easily addressed the Bank’s concerns and answered their (often) difficult questions as they assessed the risk on each loan scenario. In three out of the four scenarios, we received positive feedback of interest from the Bank. While this interest does not guarantee a loan approval, this, in our experience is a giant hurdle we overcame. 

The rest of it is the loan process.

We also spoke today with a prospective new client in a follow up to our initial call last week.  This client seeks over $4Million in funding for a unique business, a business for which many Banks and Lenders do not provide funding due to their lack of understanding of how this business operates.

We had already identified a Lender for this financing request.

In our follow up call today, the prospective client indicated they would soon make a final decision on moving forward with Aurora Consulting to secure the financing. They also indicated they were working on their credit.

STOP. RIGHT. THERE….BEFORE we go any further. (Meatloaf medley playing).

A client should not “work on their credit” without proper guidance. Luckily, we provide that kind of guidance here at Aurora Consulting. While we don’t believe in credit repair/restoration, we do have decades of expertise with credit and we also know the appetite of commercial lenders when it comes to credit. Note: We have not yet seen this person’s credit.

Our process at Aurora Consulting includes running a credit report as soon as we sign a consulting agreement with a new client. We do this so that we can anticipate any issues that could slow down or prohibit the lending process. We do this upfront so that we can provide advice that leads to a positive result for our clients.

The same holds true for our entire process. We review all financial statements, business plans, marketing plans and any other pertinent items in the early days of working with a new client.  

We do this to anticipate and resolve problems a Bank or Lender may have in the future.

When you apply directly to a Bank/Lender for commercial financing, these items, credit reports, financial statements and the like, are not seriously reviewed until the very late stages of the loan application process. By then the applicant has spent time collecting and submitting documents and spent money on application fees, appraisal fees and other associated costs.

Literally most Banks/Lenders do not run a credit report until the very final stage of the application process, weeks or months after the initial application. At that point, if a credit issue arises on the credit report, all those weeks and months of work are quite literally flushed down the toilet and the loan is declined.

Our role as your financing Broker is to review all relevant documents, including a credit report, in the early stages of your request, before the application, before we’ve even considered conversing, in depth, with a Bank/Lender.

That’s why today, we hit the mark with 3 out 4 of our loan scenarios getting the green light from a Bank to move forward to the application process.  

We were prepared for every question and concern the Bank had because we’d reviewed credit and documents. We anticipated problems in advance and could converse honestly with the Bank on possible workarounds for those problems.

It’s what we do, because we are the business-owner’s advocate. We work for the business-owner. We would be remiss if we didn’t share with you that banks call us when they can’t underwrite the loan. So we understand their process.

Ask us any questions when it comes to business loans. If you want your business to survive, and THRIVE despite the worst crisis we’ve seen in our lifetime, please call us with your questions.

Email [email protected]

Quick Access to Working Capital

If you are aware of factor financing, you may know that you can leverage your Accounts Receivables with a Factoring Lender to get quick access to working capital. However, you may be concerned what your Customers will think when they have to send their payments to a different address.

  • Lending aspect aside, it is not unusual for Businesses to create a different location to receive payments on Invoices, whether a physical location or an electronic ACH location.
  • The Factoring Lender works hand in hand with you to ease the transition for payment destination on your Invoices.
  • Many of your Customers are already sending their Invoice payments for other B2B purchases to Factor Lenders whether they know it or not.
  • Factor Lending, while a niche financing solution, has been utilized by businesses in need of quick capital for 30 years.
  • Businesses frequently leverage Assets, Property, Income and other collateral to obtain working capital whether it’s a traditional Bank loan or other financing solution; leveraging your Invoices is no different.
  • The fact your business is borrowing money demonstrates strength, not weakness.  You’re demonstrating your faith in your business by borrowing money to continue to grow your business.

Factor Financing is an affordable, fast, financing solution to help you leverage important aspects of your business–in this case your Accounts Receivable–to obtain the working capital you need.  It’s easier to qualify for Factor Financing than traditional Bank Loans, especially during the pandemic paradigm when Banks are making loans difficult to obtain.

Factor Financing Qualifying Criteria:

  • You must sell your Product/Service B2B
  • Your Customers must pass muster for basic creditworthiness on their ability to pay Invoices
  • Non-Progressive Billing
  • Startups Acceptable
  • Consistent Accounts Receivable practice

Let us ease your worry about what your customers will think. Learn more to see how this could be a solution to keep your business going during this pandemic. Email us at [email protected].

Optimize Cashflow During This Pandemic

In this difficult time, normal Bank lending criteria has tightened up.  Banks, always risk-averse, have become even more so during the pandemic. If a Bank is lending at all to businesses, they are only doing so to their existing business customers, and those customers must have demonstrated ridiculously healthy financials before the pandemic and more so now.

In other words: for businesses that are booming during the pandemic paradigm, in need of working capital to keep up with demand, the purse-strings at traditional Banks are pulled super tight.

Let’s discuss the fortunate scenario that your products are flying out the door or your services are in high demand right now due to the new pandemic paradigm. However, you find yourself in need of working capital, here’s a unique solution for your business:

Convert your Accounts Receivables to instant cash.

If your Customers have a good history of on-time payments within 40-60 days of Invoice issuance, and you’re selling B2B products or services, then you’re positioned to take advantage of this quick, affordable, working capital solution.  Lean into your Receivables and get the cash you need today to better service the orders for your Products and Services with Accounts Receivables Factor Financing.

Criteria:

  • You must sell your Product/Service B2B
  • Your Customers must pass muster for basic creditworthiness on their ability to pay Invoices
  • Non-Progressive Billing
  • Startups Acceptable
  • Consistent Accounts Receivable practice

Contact us to learn more about how Factor Financing could be an incredibly efficient and cost-effective way for you to have capital flowing to your business. Email us at [email protected].

5 Mistakes Business Owners Make

Let’s get it out of the way right now. We say 5 mistakes, but there are more. Don’t shoot the messenger. Part of the reason we post our blogs & vlogs is to raise awareness that financing doesn’t have to be as difficult. Don’t get us wrong, it can be a long process, but you have more control than you think.

These are the top 5 mistakes we’ve experienced with business owners when they are seeking financing.

1. Thinking the Bank knows everything about you.  You have all, or most, of your accounts with your local bank, including your operating account, savings, personal account, maybe even merchant services & payroll. It’s easier to bank in one place.  You think the bank maintains a detailed file on your financials, that they know how much revenue passes through your accounts every month.  This would be an incorrect assumption. The bank will still ask you for your full set of financial statements and much, much more.

2. Old Financials.  A business plan that’s five years old won’t fly. If you’re updating your Accounts Receivable aging report or your Profit and Loss statement on an infrequent basis, you will have some work to do and this most certainly will delay the process. You control the timeline when you apply for credit financing. Having updated documents at the ready lets you submit them with all speed and alacrity to move your financing request along.

3. Incomplete Financials.  No business plan? Many businesses don’t have one whether it’s a new business or an existing business. There are many, MANY financial forms that a lender will require. It will be your responsibility to provide complete, comprehensive information that many businesses, unfortunately, do not have easily accessible. Lender’s will have a debt schedule form and if this is inaccurate, it will slow down the process and delay your approval.

4. Too Busy, Too Rushed, Too Overwhelmed…Too Late. Bad decision-making often arises from lack of time and a local preparation. However, it happens that then you’re faced with a sudden, unexpected need for working capital. This sounds like opportunity, but if you’ve not been minding the store in the meantime, you will be faced with a high probability that you could be without options or very few options if any at all.

Bad decision-making begets more bad decisions by way of choosing financing options that is super expensive and over priced such as Merchant Account Financing (Merchant Cash Advance – MCA), hard money, equity investors, refinancing a personal residence and/or hitting the credit cards. This leaves you vulnerable to a lack of income & profit taking away any joy in running your business. We bet that you didn’t get into business to be broke and stressed out.

5. Failure to Fight.  Your Banker wants to make the loan work for you, because they truly value your relationship with the Bank.  When you get bad news, don’t take it lying down.  Dig in with your Banker—in person whenever possible—and get to the solution-seeking.  What do you need to do to flip this decision from a negative to a positive?

We have seen good people who own good businesses make bad decisions. We are truly fortunate and grateful that we have forged many valuable relationships with Bankers & Lenders. They know that sometimes they can’t do the deal, but they value the relationship with their client. If the Bank doesn’t make a decision favorable to your business, that doesn’t mean you should make a subsequent bad decision.

The more proactive and prepared you are, the more options you will have.

Bankers and Artists

background abstract art with gold dollar sign in center“When bankers get together for dinner, they discuss Art.
When artists get together for dinner, they discuss Money.”
~ Oscar Wilde

Bankers have the money, control the money, determine where the money will go and who will get it.  In the vernacular, those decisions are called “loan approvals.”  Do Banks skew to the conservative when making lending decisions?  Depends on the Bank, but overall, the answer is probably “YES.”  Sure, riskier credit scenarios can find a home, along with commensurate difficult terms including higher interest rate and other factors.

That leaves the Artists, or, you, the Business Owner, out in the cold and wondering about how to obtain the capital you need to grow your business.

At Aurora Consulting, we believe the path to success for your business credit financing request lies in three factors.

The first factor is the choice of Lender.  Different Lenders have different tolerances for risk.  And, different Banks have different perspectives to find a profitable return for their Depositors’ money. Any given Bank may create lending opportunities due to a strategic decision to lend more in certain credit profile areas.  In both these types of Banks/Lenders, though the credit risk may scare away a more conservative Bank, the terms of the loan don’t have to be onerous.

We believe the second, and maybe the most important factor in credit financing success is in presentation.  We recently watched the Will Smith movie “Hitch” where he plays a coach of sorts to lovelorn men seeking to get out of their own way to find success in love.  Much of the advice “Hitch” gives has to do with presentation, the manner in which a man listens to a woman, the way he honors her presence, and more.

We think that the Loan Application and the manner in which it is presented to a Lender is the fundamental key to success, combined with the other two success factors.  That’s why we strive to ask all the same zillion questions an Underwriter may ask, why we collect so much documentation up front from our clients, and why we carefully package our loan requests to present to Lenders.

The final factor for success in credit financing is the positivity of “The Close.”   Obstacles pop up along the way in every financing transaction.  Our aim is to overcome obstacles with positive attitudes and a sharp focus on getting to the closing.  We use positive language, we seek out positive solutions; we refuse to be waylaid by negative emotions, words, challenges.  This is our Closing Attitude at Aurora Consulting.

Bringing these three success factors together is what we do at Aurora Consulting.  It’s no secret to any experienced financial professional, but it certainly feels like it’s our own secret recipe for credit financing success.

Pages from a Salvador Dali notebook including doodles and calculations of income and expenses, the artist thinking about Money.  
Pages from a Salvador Dali notebook including doodles and calculations of income and expenses, the artist thinking about Money.

Whether you are an entrepreneurial “Artist” seeking to bring your vision for success to life with business credit financing, or a Business Owner searching for the best solution for your working capital needs, let us at Aurora Consulting be your concierge to guide your financing needs to the right conclusion, the one where the Bankers embrace your “art” and release the money to fund your continuing business success story.

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The Scorsese Way

Martin Scorsese has had a long and storied career in cinema.  The legend he has created is that of the Director using his extensive knowledge of film to enhance his cinematic creations. As a Director, he pushed the boundaries of macabre crime drama.

Along the way, according to this latest biographical feature in the New York Times, Mr. Scorsese developed his own way of working within, or rather, without, the “Hollywood machine.”  In particular, Mr. Scorsese created a separate path for financing his films using independent financiers and eschewing the financial support from the studios.

Frustrated with the unrealistic pressures of working within the confines of the studio system, he came to believe that Hollywood studios had become his “mortal enemies.”

As he says in the NYTimes piece, “It’s like being in a bunker and you’re firing out in all directions…you begin to realize you’re not speaking the same language anymore, so you can’t make pictures anymore.”

The latest development in the “Scorsese Way” of making his movies is his partnership with Netflix, the streaming service that is about as far from the Hollywood studio system as you can get in the early 21st Century.

We think the key element of this aspect of Martin Scorsese’s story is the financing component.  In short, those folks with the money–Hollywood Studios–brought unrealistic expectations, exerted extraordinary pressures, and ultimately hampered one of the greatest cinematic talents of the past 100 years from achieving his true potential.

We see this time and again with Small and Middle Market Businesses too.

If your business marches in the “big leagues” that is, with gross revenues exceeding $3Billion annually, then Bankers are the friendliest bunch of people on the planet. But if your business is in the Middle–$10 Million up to $3 Billion in revenue—or worse, a Small Business (below the $10M mark), you’ll find Bankers are not so friendly.  

To define friendly, let’s refer to our description above of the Hollywood Studio system’s treatment of the incredibly talented and successful Martin Scorsese.  In the NYTimes piece he discusses the unrealistic pressures from studio executives (the folks with the money) to shorten movie running times, and other extraordinary requirements for his films, “The last two weeks of editing…‘The Aviator’…I said if this is the way you have to make films then I’m not going to do it anymore.”

Imagine that.  Imagine the cultural and entertainment loss sustained when a talent as large and ambitious as Mr. Scorsese decides he’s had enough because the people with the money keep telling him what to do.

We blogged recently about “Don’t Tell Me How To Make My Pizza” about a similar story about an ambitious and creative young business owner.  He’s created a unique new type of sourdough pizza.  As he grows his business, he needs capital.  But he chose to bring in equity investors instead of engaging with us at Aurora Consulting to find quality credit financing.  You can be sure that sometime in the near future his equity “partners” seeking higher returns on their investments, will insist on changes to that unique pizza recipe.  Martin Scorsese all over again.

It’s the New Year and we’re committed here at Aurora Consulting to financing solutions for your business success story.  We believe in access to credit.  We’ll work diligently and enthusiastically to find the best credit financing solutions for your business.  

Take a page out of the Martin Scorsese playbook (except the part where they dump the bodies!), and find your own “Scorsese Way” to finance your working capital needs while preserving your vision of how your business should run and grow.

Download our DOCUMENTS CHECKLIST here.

Streamline Your Financing Request

Want to become a priority with the banker?

Summarizing your financing package can help to prioritize how your banker reviews your financing request.

We recently submitted a client’s financing request to one of the Lenders on our lending matrix.  Our Lender Rep. said, “Holy cow, you guys are on top of it with your summary. Not many brokers make it this easy to review the package.”

We made it easy because the client provided us with their financials. The financials were comprehensive. It’s a multi-million dollar corporation and we’re at the early stage of presenting to the lender. We want to show something that’s easily digestible. We want to ease  the process for the lender to give us a prompt review and tell us their interest in offering the financing.

Summarizing your financials is easy to do.  When you have a lot of line items that lead up to one, just one, type of deduction or one type of income source, simply summarize it. Drop it down to as few lines as possible so the lender can do a quick review and say,  “Okay, I see the picture here.”

The Lender doesn’t need to know the granular line by line details at this early stage; you want the Lender to give a fast review to gauge their interest. If the Lender expresses interest and offers a Letter of Intent for the financing, you can present the more detailed financials with your full loan application package.

For each financing request, present a one or two page statement describing the background of the business, the reason for their financing request, and, in bold, large font, the amount of our financing request.

Our presentation package for the initial Lender review is compact yet complete.  The “first glimpse” by a Lender is sufficient to tell us if that particular Lender is the right fit for our client’s request, or if we need to locate a different Lender.

Visit our Financing Fodder YouTube Playlist on how to prepare your business loan request.

FEE Fi Fo Fum

When you walk into your bank to apply for Business Credit Financing, the most likely result is the Banker chats with you for a few minutes then hands you an application package for you to complete.

It’s a nice package. The Bank logo is prominently displayed and the information required is laid throughout the package.  The documents are listed in the package to make it easy for you to move through them in a logical progression.

When you’re done with the package, you bring it back to the Bank, along with your supporting documents (Tax returns, Updated Financials, etc.), and the application fee.

The bank isn’t taking any action or providing you with a decision, or even feedback on your financing request without the completed application and accompanying fees.

At Aurora Business Consulting, we’re happy to be your resource to spend the time BEFORE the application is presented to the Lender to determine your business’ qualifications, identify obstacles, consider strategies and outline the financing products that will help you to achieve financing success that will help to attain your goals. 

We find the right Lender for your needs.  It doesn’t stop there.  We’ll act as your “concierge” as we handle all the documentation and communications with the Lender.

In short, when you begin your process to find Business Credit Financing with us, we don’t simply hand you an application package and ask you to fill it out, return it and pay the fee. Yes, we do require a small investment from you in the form of our processing fee.  

We ask this and require this because there is a process to qualifying your financing request and we invest time to search for the best financing solutions for your financing needs.

Occasionally we’ll meet a new prospective client, conduct our initial telephone interview and discuss how we can move forward.  We send out our Introductory Broker Package which includes our Broker Fee Agreement, an Overview of the process and a Credit Authorization Form to run credit report(s).   

Occasionally the prospective client doesn’t return the package nor pay the fee. They disappear.

We understand that sometimes the upfront fee might seem to be an obstacle in the mind of the prospective client.  

But, we also understand the common procedures in our industry and that processing fees are a standard requirement. We’re not the Bank.  We’re YOUR Broker.  We work for you, not the Bank.  We’re investing our time and experience to a dedicated strategy: Find your requested financing.

We are not the right fit for everyone and that’s okay. Some of the clients we work with may have already been down a dead-end path with lost money and time to show for it.

We work with people that understand and value the time it takes to vet the banks that have specific appetites for your financing request.

We value your time and appreciate the consideration it takes to move forward to build your business. 

Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.

Don’t Tell Me How To Make My Pizza!

We had a conversation with one of our Real Estate Broker Extraordinaire friends about all things business-related and, more specifically, about PIZZA.  She loves pizza similar to one of us here at Aurora Consulting (we’ll let you guess which one).

The chat happened while discussing an innovative pizza-restaurateur who created a wonderful and completely yummy pizza product.  This brilliant entrepreneur has come to realize his business is growing so rapidly that he suddenly finds himself in need of working capital to fund an expansion simply to keep up with the growth.

Good problem to have…except for the seeking working capital part.

The money part is where it gets challenging for this smart young pizza-entrepreneur.  He faces an important choice while facing the money challenge.

Should he search for a Lender to provide credit financing, or, surrender part of his business to an equity investor?

At Aurora Consulting, we believe this question has a simple answer.

Why surrender equity, and cede control, when you might very well find a credit solution to obtain the much needed working capital?  Yes, the answer is a question!  Or, the answer to the pizza-entrepreneur’s question can better be stated with the retort, “Don’t tell me how to make my pizza!”

Bringing in an equity investor for any growing business could (someday sooner or later) lead to your equity investor asserting control with how the business should be run.  That opinion could include, for this innovative pizza entrepreneur, suggestions on how to adjust the unique pizza recipe, you know, to make the product more cost-efficient.

Or the opinion from the new “partner” could be any number of other ideas, suggestions, opinions, plans, assertions, on growing the business, you know, to be more profitable.

That equity investor may have no idea at all about how to make pizza.

Many business owners are concerned with the idea of credit financing.  Let’s face it, credit financing can scare the heck out of many people.  Thank you to the global credit bust and subsequent recession for that anxiety-filled-ideation.  Borrowing money from a Lender, whether a traditional bank, or a non-traditional portfolio lender, is often a much more tranquil experience than you might think.

The question becomes one of finding the right lender.  The question never, ever, ever, becomes one of, “Hey, how about we use this ingredient in the pizza recipe instead of your original because this ingredient is cheaper and our product will be more profitable?”

Yeah, that question.  It’s not going to happen when you finance your capital cash needs with the right loan product and the right lender.

Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.

Growth Can Be Sneaky

Growth?

Sometimes, it sneaks up on us!

And when it does, sometimes we need working capital to finance that growth.

That is, if you welcome growth and want to ride that momentum.

If change is NOT your thing, STOP reading NOW!

IF YOU ARE STILL READING, there are ways to access the capital you need to ride the growth wave very quickly.

You’ve been busy growing your business, and it’s paying off.  You’re keeping your financials current and do your best to predict future market trends, sales goals, and costs.

But growth can sneak up on you.  And when it does, you need to fund that growth, whether it’s for marketing expenses, operating capital, equipment purchases or other costs dynamic to your growing business. If you have sufficient cash assets, then you’re all set.  If you have a sufficient line of credit from your Bank, you’re good to go.

The problem is, when you set aside those cash assets in the first place, when you created that line of credit, you couldn’t perfectly predict the cash you’d need when the moment of truth arrived in the future.  Growth has a way of surprising you, a lot like flood waters after a heavy rainstorm, but in a good way.   You may find yourself scrambling to find the capital you need to fund that growth.

Traditionally, businesses caught in this capital-crunch-conundrum turn to their Banker for assistance for a new Line of Credit or an expansion on an existing Line.  Maybe a straight loan, or a loan mixed with a Line of Credit.  The business owner in this scenario can’t predict if the Banker can or will take on the appropriate risk to fund the right amount of capital needed.  The Banker may not see the optimistic opportunity presented by your sudden collision with your growth floodwaters.

Plus, the timeline to obtain the requisite capital funding from your Banker may be too lengthy to get the cash in hand quickly enough.

For the business owner confronted with the surprise of growth, the uncertainties faced with the traditional Bank financing may be too much to bear as they consider matching capital needs with growth experiences.

Pivot to the other extreme, business owners find themselves funding their capital requirements with funding that is quickly available and sufficient in dollar amounts, but the cost of that capital can be astronomical.

In the middle ground between these two financing scenarios exist alternative options.  Asset-Based Lending leaning against your Accounts Receivable or Inventory, or specialized financing against your Purchase Orders, provide timely, strategic and cost-effective solutions.

There are also hybrid solutions, financing that meets your short term needs while you work on completing the more complicated traditional financing package.

At Aurora Business Consulting we seek out those alternative financing solutions with a creative mind towards getting you the capital you need in an efficient timely basis to continue your business success story.

There’s no surprise in how we work, with diligence, enthusiasm, and experience.

Email Trevor for more info on how this may or may not work for you!