Red flags in financing go both ways. Whether that warning is your gut telling you to find a new funding partner or a reason your current one can’t serve you, any breakdown is sure to cause some friction. To the unassuming business owner, this can get in the way of obtaining, increasing and keeping traditional financing options. When that happens, the money dries up. The panic that comes with a lack of cash access can force businesses to settle for costly and shady funding alternatives.

To help, we’ve compiled ways for business owners to get out ahead of this panic by understanding what to keep an eye out for and how to prepare for future funding needs.

Funding Partner Red Flags

On the other side (the costly and shady side) there are many who think that the ultimate target are inexperienced, uninformed, insecure and desperate prospective clients. After all, the feeding frenzy of fear-based decision making can coerce even the most intelligent professional into compromising lending agreements.

If your lending partner is overcomplicating the process, trust your gut. A healthy lending relationship shouldn’t include scare tactics to get you to choose quickly, confusing language, or overly complex documentation. Your funding partner should spend time going through constraints, covenants, and any caveats to ensure you fully understand what you’re getting into.

Preparation Instead of Panic

It can be scary to attempt to secure funding when your business is in a dire position. Believe it or not, it’s hard to think straight when your hair is on fire, you’re stressed about your situation, and anxious of not being able to perform the obligations of your contract awards without funds.

Here are tips to help you prepare before the opportunity becomes an obstacle:

  1. Keep consistent, accurate financial documentation. Your first step is getting a bookkeeper or CPA. Outsource what you don’t do well or pay the price of what your own inaccuracies will produce.
  2. Engage your lending partners early and often. Know your banker and be sure they know your business. Ask them for alternative resources should they not be able to assist you and be upfront that this is a must-have understanding.
  3. Listen to your CPA and CFO. Get educated on what your cash flow capability and needs are and how that can affect your ability to perform on upcoming and current projects.
  4. Don’t be scared to ask questions. Make sure when you do that you understand the answers, and if not, don’t be too proud to ask for clarification. Ego is the biggest killer of success.
  5. Find mentors in your industry and ask them about their experiences in lending and for references for the resources that worked for them.
  6. Incorporate your financial plan into your capture process. The question isn’t, “what if I win.” The question is, “If I win it, can I fund it?”

We proudly service growing government contractors and are happy to answer any questions that might help you advocate for your business. We want you to feel good about your decisions and match with a lending partner that is right for your business! You work hard for your money, and your lending partner should work hard to support you in your journey towards growth and overall success.