2013 is turning into the year of lending expansion. Lenders all over the country are growing their product offerings to try diversifying their portfolios and making themselves more attractive to new customers. Traditional banks are offering products they have typically shied away from in the past, such as factoring and asset based lending.
Also, old-school factors are now more interested in additional, alternative financing products such as inventory advances, M&E and real estate loans while traditional asset based lenders are selectively offering purchase order finance. In addition, banks, factors and asset based lenders alike are going after specific sectors that they have not in the past such as healthcare, staffing and construction finance. Trade finance services - letters of credit and vendor payment programs – are becoming even more popular with various financial institutions as imports from overseas continue to dominate the US marketplace.
While there may be more choices than ever before, that doesn’t mean that all products or lenders are created equal. Experience matters, particularly in the alternative financing space. Executives who have been in the ‘trenches,’ through tough situations have institutional knowledge that cannot be learned overnight.
So while it appears companies have more choices, there are important questions that should be asked before choosing the correct lender:
1) How long have they offered the specific product?
2) Have they ever financed the sector in which the company operates?
3) How are the credit decisions made and who is making them?
4) Does the institution have the ability to increase credit lines as a company grows?
5) Does the institution offer various financial products that may not not be needed at the time of the loan closing, but may be needed later on as the business expands?
As lending continues to grow throughout 2013, it is important to remember to explore your choices to make sure you end up with the lender that is right for you.