03 Jun Unlock Business Growth with Customized Business Loans
Size 10 is one of the most popular shoe sizes. But how successful would a store be if it only sold size 10 shoes? Probably not very, since a lot of people wear other sizes, too.
Bank loans are like size 10 shoes. They might be right for some businesses, but many find that a more customized loan better fits their business strategy.
Is your short repayment term choking your cash flow? Are you struggling to make monthly payments on your traditional loan? You can avoid being boxed in by terms that don’t evolve with your circumstances with customized business loans.
These aren’t cookie-cutter funding options or minorly tweaked standard loans. Your company’s needs and future success drive the loan’s design. Fitting your financing to your business empowers you to grow with confidence. Keep reading to understand what a customized loan is, what to look for in a customized business loan, and how to find lenders experienced with tailored financing.
Customization in Your Loan
A customized business loan is a loan that a lender tailors to the needs of your business. Not all businesses can meet the terms of traditional loans. Customization allows you to create a loan that will meet your needs and have a realistic plan for repayment. Here are some areas where a lender can help you customize a business loan.
Growth Stage
How long your business has been growing changes your financial needs. A new business looking to establish itself has very different needs from a mature company seeking to scale operations. Customized loans take this into account.
For example, early-stage businesses without lengthy financial track records require creative underwriting to get started. A customized business loan will be flexible with the required documentation and repayment terms to support initial inventory purchases, marketing efforts, or hiring.
Mature companies benefit from personalized financing, too. Established companies might use asset-based loans around the collateral value of their accounts receivable or equipment. A customized loan will leverage your business’s wealth for continued growth.
Revenue Schedule
A major advantage of customized business loans is that your lender can align repayment schedules with how and when your business earns revenue. A flexible repayment model adjusts to your cash flow rather than a fixed monthly payment that doesn’t reflect income cycles. You avoid the common trap of scrambling to cover loan payments when revenue dips.
Some lenders will integrate revenue-based repayments, where the amount you pay fluctuates based on a percentage of your monthly income. An e-commerce business that sees a spike in holiday sales or a landscaping company with peak business in the spring and summer can benefit from customized repayments. You could arrange seasonal payment adjustments to account for times of greater and lesser cash flow in your business.
Investment Return Speed
Loans that are too short for your investment can ruin your cash flow, while repaying an unnecessarily long loan wastes your money on interest. Customized loans consider how quickly you expect to see a return on investment (ROI) when setting the length of the loan.
Suppose your landscaping business invests in a small business equipment loan for an excavator that will boost production immediately. In that case, a customized loan sets a shorter term to maximize your ROI. Flexible financing also provides longer-term options if the return on your investment won’t materialize for a year or more. A customized loan even offers deferred or interest-only payments to bridge the gap.
Funding Schedule
Customized loans work as strategic tools for funding on your schedule. Your lender can break the loan amount into tranches timed to execution phases in your business plan. For example, you are opening a new location that requires hiring new staff, increasing inventory, and purchasing equipment. A traditional loan gives you the lump sum, but a customized loan releases proportional funds in stages. Customizing your loan this way saves you money on interest and reduces the financial risk to your lender, which can reduce your interest rate.
Lending Partners Experienced with Customization
Securing a customized business loan that matches your needs hinges on choosing the right financial partner. Not every lender has the tools or traits to match a loan to your business needs. Here are some characteristics you will want to look for in a lender
Industry Experience
Experience in your industry means a lender will properly evaluate the terms of your loan. A lender who understands the trends in your sector can offer proactive financing strategies, like matching your loan to your return speed or funding schedule.
You are also likely to get a fairer risk assessment from a lender who works with similar businesses, which lessens your interest rate. Lenders for your industry are a great place to start looking for customizable loans.
Regional Knowledge
Your business’s risk varies widely depending on where you live, but lenders may not have regional knowledge when they set your terms. For example, a lender in Texas will not know the risks to consider if your business opens a new location in Naperville. In that case, a lender who offers customized business loans in Chicago will offer terms that accurately fit your business.
Business Connections
Banks are unlikely to offer truly customized loans. However, a lender outside of the bank may not have the resources to offer the loan amount or terms you need.
A lender who has connections to local banks, private investors, and family offices has the flexibility and resources to offer a customized loan. Ask how the lender secures funding and how long they have worked in your industry and region to investigate their business connections.
Solution Mindset
A transactional lender may balk at loans that require creative underwriting or involve equipment as collateral. Your lender should have a can-do attitude when you talk to them about customizing their business loan. Not a lender who overpromises to sell you on their services, but someone with the experience and desire to meet your needs. Ask about the different kinds of loans they have secured as evidence of their problem-solving skills and experience.
Growth on Your Terms
Growth isn’t a straight line. Your financing shouldn’t be, either. With customized business loans, you gain the flexibility and financial support to pursue opportunities without being weighed down by rigid repayment structures. A customized loan is a loan that works for you and opens your business to growth for years.
If you are struggling to meet the conditions of a traditional loan, find a lender who can help you learn about all your options. Just like we have a variety of shoe sizes, your business could thrive with a loan that is made just for you.