Navigating Bank Lending In Business Transactions

Navigating Bank Lending In Business Transactions

Short of having a suitcase full of money at hand, working with a bank will be part of the process in almost every merger & acquisition or refinancing transaction. Very often banks will have underwriting “deal points” they like or dislike about a particular industry or business. For this reason, banks can often make or break a deal. Therefore, it is beneficial to have several banks competing for your loan request during the transaction process.  

A recently released survey from the Federal Reserve shows how the pandemic has altered the financial landscape for small businesses. About 85% of small businesses experienced financial difficulties in 2021, up nearly 20 percentage points from 2019. Back then, more than half of owners who sought a loan were looking to expand. In 2021, the majority of applicants needed funds just to cover everyday operating expenses.

Meanwhile, inflation is the highest in decades, with raw materials and finished goods soaring in price and workers demanding higher wages. The Federal Reserve is raising interest rates in response, which means the cost of borrowing money is going up.

Even in normal times, it can be tough for small businesses to get loans from traditional banks because they lack the assets, consistent positive cash flow and profitability. Since the pandemic, banks have been reluctant, outside of COVID-related programs to lend. Loan applicants are more likely to get turned down or to receive less money than they asked for compared to before COVID-19.

For these reasons and more, having a trusted and connected business advisor who walks with you through the transaction process is more important than ever.

CAPSTONE Business Advisors has an extensive list of business-friendly banks and long-term relationships with lenders. Our relationships help our clients more successfully and efficiently navigate the lending process.

In a recent Case Study found here, you will see an example of how we were able to assist the buyer of a dock building and metal works business through all of the hurdles related to financing because of our relationship with the bank and depth of experience.

Having a strong understanding of where your business currently stands, and where you want to ‘grow’ is the first step in preparing for a successful transaction down the road. This process begins with a CAPSTONE Business Assessment. Read more about our Assessments here and schedule a call to discuss.