Access to capital is one of the largest obstacles facing small businesses. Of the 27 million small businesses in the U.S., 14 million aren’t getting the funding they need, according to some estimates. You can help them solve this.
It’s time to start transitioning into the financial advisory role clients want. There are hundreds of places you can start — but why not start where small businesses hurt the most?
So, how can you help them? By adding loan preparation services to your practice. You can help your clients find the working capital they need, from beginning to end. Here’s how to make it work:
1. Help identify their capital needs. Very few people know your clients’ financials like you. But start looking further into their financial future, trying to identify if there are cash-tight moments approaching. Or try to keep a pulse on your clients’ desired goals, and when they’ll need extra cash to get there. They may not know that’s what’s standing in their way, nor can they see trouble coming as clearly as you. On top of this, let your client know you now offer loan preparation services. This will give them the green light to come talk to you if they think they may need financing.
2. Assist in the product search. Once your client has decided that they’d like to find outside financing, you can help them identify the best lender and loan product for their situation. With 82 percent of small-business loan applications denied by the banks, according to some studies, gone are the days of simply referring your clients to the local bank. However, if your client has truly stellar financials (strong credit, booming revenue, high profits), then you should recommend that they start at the bank. But if you know your client has a weak spot, like a struggling credit score, it might be better for them to start their search online.
You should make sure you understand what your client is using the loan for. If it is because they have slow-paying customers, maybe they should consider invoice financing. Or if they are using the money to buy equipment, they should look into equipment loans. No matter what, it is important to encourage your client to shop (or offer to shop for them), so they can be certain they find the absolute best loan and rate for their business.
3. Take the pain out of the application. Small-business owners are wearing a thousand hats, and the most valuable, precious thing in their business is their time. Help these business owners save time by assisting with their loan application. The loan application will be a breeze for you — you already have access to their financials. You can complete the questions you know, upload the documents you have access to, and then bring your clients in to complete the rest. You’ll be a real hero to them, helping save them from what is one of the most painful parts of the entire financing experience.
4. Explain their offers. Once your client’s loan application has been sent to the selected lenders, and they start receiving offers, this is when they’ll need you most. When your client gets a term sheet, walk through what the true cost of the loan will be, and what the payment schedule will look like. Offer to create an amortization schedule for them. This enables you to decide together if they can afford the offer.
As commitment letters are received, help your clients identify any unusual additions, such as prepayment penalties, origination fees and closing costs. Shedding light on these often unexpected fees can give them fair ground to really compare all offers, and decide whether or not financing is truly the best step for their business.
Obviously, loan preparation services aren’t for every practice. But if your clients are growing small businesses, why wouldn’t you want to help them take their business to the next level? By adding a loan preparation service to your business, not only are you beginning the evolution to a proactive financial advisor but you’re helping your clients with one of the most important decisions they’ll make as business owners.
Meredith Wood is the editor-in-chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates.
