Most large enterprises tend to be fairly stable in the medium term (except for those in high tech). On the other hand, small and medium enterprises have at least a 50/50 chance of experiencing significant changes, whether positive or negative, during the average term of a lender-borrower relationship. So, the question we must ask is how will the lender react when it becomes aware of the borrower’s changed circumstances. In other words, “What happens next?”
The agreed structure and pricing aren’t so important now. The lender’s reaction is what is critical. If the borrower has an opportunity to materially increase its size and profits, will its lender thoughtfully offer a revised plan that provides what is necessary for the borrower to plow ahead?
However, if the borrower faces a challenge to its viability, will the lender thoughtfully consider how it can safely be of help or will it have a knee-jerk reaction and panic?
What will happen next is foremost on our minds at Capital Access Partners when we are engaged to assist our clients in securing new capital. We strongly believe that COMPATIBILITY with their capital providers is even more important than price and structure. “Optimal Pairing™ = Optimal Results."
Some of the things we consider include:
Does the lender have a working familiarity with the industry?
Does the lender exhibit a very good understanding of the borrower’s current circumstances and its near-term potential OR is the lender merely looking at how it can get the deal past its credit committee?
Does the lender provide access to its key decision makers?
What is the lender’s reputation?
Is the lender financially stable?
When it comes to “What Happens Next?,” you can be certain Capital Access Partners knows the answer.