How to Become ‘Lender Friendly’

Becoming more ‘lender friendly’ can instantly increase your chances of securing funds faster and with less frustration.

Most businesses can’t self-fund all of their operations and strategies all of the time. So they must turn to lenders to help bridge the gaps. Getting this must-have financing can be a daily concern for many business owners and CFOs, and becoming more “lender friendly” can instantly increase your chances of securing those funds faster and with less frustration.

Your lender is going to be doing a variety of activities when you request financing and if they see a red flag it could cause significant delays. Lenders talk to countless businesses that are trying to secure funding, so if you can set yourself apart by being proactive, coming prepared and demonstrating your professionalism, you’ll take higher priority.

This is true when looking for financing from any type of lender — whether it’s an alternative lender, bank, private investor, leasing company or anyone else looking to advance capital.

Again, the goal is to be “lender friendly” so they will quickly recognize you as a valuable prospective client.

Before you even talk to a lender, you should perform the exact same tasks they will be doing to check that you would be a worthwhile client. If you discover problems, you can fix them in advance — saving you time, reducing frustration and improving your chances of getting financing.

Give your business the best shot at accessing that much-needed cash flow by completing these six crucial tasks.

1 Perform a UCC or PPSA search

2 Check your credit report

3 Create a target list of financers

4 Do your research about online lenders

5 Get your finances in order

6 Do an entity search

1. Perform a UCC or PPSA search

If you follow one tip, make this the one.

One of the most fatal financing problems is out-of-date or inaccurate “security registrations” filed against your business. Security registrations are filed by lenders or creditors to help guarantee you make your payments, often using personal property as collateral. These are common in the world of lending, and once your debt is paid off the record is discharged.

However, sometimes the records aren’t clean. Even if you think there are no security registrations filed against your company, it’s worth double-checking the official records. Some common problems include:

Incorrect filings
Debt was paid off, but the filing was not discharged
Wider scope of security than you agreed upon was registered
A registration was filed against your company without your knowledge

When these security registration records are incorrect, they can stop you from being able to secure future financing. Other lenders will shy away from providing you further financing since they won’t be able to claim the proper security interest against your assets.

Example security registration:

Let’s say you purchased a printer from an office supply company a few years ago. You paid the printer off last year, but the security registration remains. Now you’ll need to go back to your supplier and ask that they discharge the registration. Their admin is backlogged, and they now say it could take days or weeks to fulfill the request.

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2. Check your credit report

Pull a credit report on both your business and on yourself, and do this on a regular basis. Sometimes these reports also have incorrect information, and it’s important to be aware of mistakes so you can fix them.

You might also discover a multitude of items within your credit report that show signs of identity theft, which has become a modern reality. If someone is using your identity, there are going to be breadcrumbs and trails. Don’t be overly worried, but be aware that it is a possibility.

As for frequency, pull your report yearly. It doesn’t cost a lot to obtain your own credit report (some may even be free), and the time it takes will be well worth it to make sure the information is accurate.

There are many options to obtain your credit report including common providers like Equifax, Experian and Dun & Bradstreet. For personal credit reports, you can also look to sites like Credit Karma. Check around and find the right option for you.

Of note, it is worthwhile to request a D-U-N-S Number with Dun & Bradstreet. The D-U-N-S Number allows you to proactively add your most current information to Dun & Bradstreet’s records. It is used by lenders to predict if you are a reliable and financially stable company, and is an easier method for them to find your credit information.

Visit a credit report provider’s website.

Will this impact my credit rating?

It’s a common misconception that requesting your own credit report could damage your credit rating. If you’re just obtaining the report and just looking at results, this will not have a negative impact. However, if too many banks or lenders request your report at the same time, that may have a negative impact, since it could signal that you’re shopping less strategically for financing. (See section 3 for more details.)

3. Create a target list of financers

If you are shopping for financing, don’t cast a wide net.

Never request funding from too many lenders at once, as this may raise a red flag when they all pull your information and records at once. These lenders might also file security registrations against your company at once, which can create an administrative mess.

Instead, target specific lenders that will be the best fit for your company, whether that comes down to service levels, industry knowledge, rates or location. Be rational with your approach and shortlist lenders that are going to have your best interests in mind. It’s also important to value those that are transparent with their terms.

Look for lenders who work in your industry and are experienced with the type of lending you require, which may have special requirements and considerations. Being able to have a meaningful conversation with a lender is always going to put you in a better place. If a potential lender isn’t experienced in your industry, you should keep searching.

Most importantly

Read all the information and applications before deciding whether the potential lender can fill your needs. What are their rates? What are the repayment terms? Will you be able to repay on the agreed schedule?

Now that you have your shortlist…

Meet with potential lenders in person whenever possible. Find out whether or not they can match your needs, and if so, then take it to the next step. If they aren’t a fit for your company, don’t complete applications, as this can trigger negative impacts on your credit rating or result in unwanted security registrations.

When you do fill out an application form, find out what types of searches or actions they’ll be taking. Are they filing that security registration? Do they look at your personal and business credit reports? Be knowledgeable about what actions you’re allowing them to perform.

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4. Do your research about online lenders

Online lenders are expanding their presence and may offer a different option for your business financing. As a borrower, be cautious that you have all the facts and don’t click through too fast.

Depending on the situation, these lenders could be a good fit for your company. But you must read the fine print and obtain full information, whether it is on their websites or in paper copies. Never apply to multiple online lenders at once.

Often, online lenders will pull a credit report on you and your company, plus do security searches. In some cases, by filling out that application you’re giving them permission to file a security registration — even if you never borrow from them. (The same problems that we described in section 1.)

Getting a security registration discharged from an online lender can be very tricky. For starters, their staff is often virtual and the customer service is entirely computer-based, making it hard to speak with a real person who can help get the security discharged. Their business model may be more about transactional deals rather than ensuring your records are clear of incorrect information. Ultimately, never allow online lenders to do a security registration until you’re sure you have a deal.

Evaluate online lenders

Consider who can offer a personal, consultative approach. Will they understand your business, your industry and take the time to understand your need for financing? Being able to have a meaningful conversation with your lender is always going to put you in a better position.

5. Get your finances in order

You want lenders to think your company is the best-run business in the world. So when applying for financing, your financial statements need to be organized and up-to-date.

However, only a third of companies have their full financial statements properly organized. Taking a long time to update your books can be an indication to the lender that there could be additional challenges when it comes to repayment. Lenders do not want to build relationships with clients that aren’t well organized.

What financial statements need to be ready?

Start with these three key items:

Budget (planned vs. actual)
Income statement
Balance sheet

In addition, larger companies may have notes attached to their financial statements, which can be an invaluable addition. If this is the case for your business, you can include these with your submission to the lender, as they can help explain the line entries, assets, long-term debt and other items. That will give them a better financial picture of your company.

Cash flow projections

You may also prepare cash flow projections, which are sometimes necessary depending on the lender requirements and type of financing you’re requesting. In other cases it’s not mandatory, but it’s still a good practice to have this in order.

Go a step beyond.

You should also consider updating your business plan, including goals and metrics. This proves you have a way of measuring success and are focused on the success of your business.

With well-organized and accurate records, the lender will view this as an indication of your professionalism. You could be seen as a more desirable future client, and more likely to get financing faster.

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6. Do an entity search

Do a search of your entity records within your federal and local jurisdictions, where applicable, to make sure the government records accurately reflect your company identity. Such records can include the names and titles of the current directors and officers of the company.

In the USA, consult your Secretary of State, and in Canada you’ll want to check with your provincial or federal government responsible for corporation or other entities. You can also ask your lawyer to help with this step, as they will likely have the most current information and access to the government records.

Over time, there can be turnover in your company — like directors or officers leaving the business. So get these records cleaned up to reflect the current situation and you’ll come across more trustworthy and reliable.

Lenders entity search

Most lenders will also perform this entity search, so records should align with your company’s reality. For example, if you introduce yourself as the president of the company, but the government records say otherwise, then you lose credibility.

By doing these simple things you’ll set your business apart from others looking for financing. Lenders will be more inclined and able to help you out quickly.

Remember this checklist:

Correct any inaccurate security registrations
Make sure your credit report accurately reflects your reality
Create a shortlist for lenders you want to meet
Research online lenders, applications and terms before completing any forms
Organize and update all financial statements and your business plan
Review and update all government records

Completing these steps will not just make you more “lender friendly” but also a sought-after candidate. That puts you in a stronger position.

When having a conversation with an investor or lender, you’ll be able to properly speak to their key concerns and priorities, pass along accurate company information and complete applications with much more ease — when you’ve chosen the most appropriate lender for your needs and circumstances.

Even if you don’t need financing right now, performing all of these tasks once a year will be a useful exercise to keep your company healthy and prepare you for future financing when needed.

Prepare your business for secure financing to ensure healthy growth.

Want to learn how to make the most out of your business cash flow? Check out the Cash Cycle Guide.

Need help with your business financing strategy?

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