Smart businesses have strategic finance partners

chess peices representing strategic moves for business financing

The relationship between commercial banks and businesses has changed dramatically over the last 20 years are so. While the US mortgage crisis of 2008, which led to a worldwide financial crisis, was the final nail in the coffin, personalised business banking was already a thing of the past. Thankfully, the entrepreneurial spirit is still alive and kicking in New Zealand, and the introduction of strategic finance partners has replaced the constant battle for funding. So-called second-tier lenders NZ/non-bank lenders have filled the troubling void left by commercial banks.

Financial flexibility and lender funding

Here at Alternate Finance, we have an array of business-related finance options. While some customers approach us on an ad hoc basis, we prefer to build a relationship for the long-term mutual benefit of all parties. As your company grows, we can grow with you and with the deep-seated knowledge from early involvement, we can arrange the best finance rates and the most appropriate deals. One of the main benefits of lender funding is speed, with on tap finance often required for time-sensitive transactions/opportunities.

Smart businesses will always find finance

Even in the depths of a recession, smart businesses will always be able to find finance. Granted, you may need to look harder during the more troubled times, but good companies always attract financial options. It is important to note that even the most ambitious, growing companies still need cash flow. The business world is littered with companies that grew too quickly, failed to appreciate their growing cash flow needs and folded. With a strategic finance partner, such as Alternate Finance, we can provide funding and put you in contact with mentors, business names who have been there and done it.

Non-bank lenders take a different approach

Non-bank lenders, or second-tier lenders NZ as they are often referred to, tend to have a very different mindset to modern-day commercial banks. While here at Alternate Finance, we are still a responsible lender, taking care not to overload our customers with debt; we always have one eye on the longer term. No business will move steadily from inception to a vast and powerful entity, without financial hurdles along the way.

While we offer an array of personal finance, we are also one of the more reputable business lenders. We have numerous lender funding packages available, taking in the following scenarios:-

Construction loans

Over the years, we have worked with numerous construction companies looking to build/develop properties for third parties. As these companies expand, they require additional cash flow to cover the cost of materials and labour. While we would still require a degree of security, there’s always a joint venture option. We provide construction loans, and you provide the labour/materials to the benefit of all parties.

In some cases, businesses have just required a short-term loan while properties are repaired or redeveloped before refinancing. As one of the leading second-tier lenders in NZ, we can provide initial finance and use our contacts to arrange an eventual refinancing. As everything is “kept in-house”, speed is of the essence, paperwork is minimal, and we already understand your requirements/plans from the initial discussions.

Equipment finance for business

Those managing a commercial business will at some point come across the quandary of purchasing or leasing equipment. The purchase of equipment can put more pressure on cash flow, and the leasing of equipment, especially from the equipment/supplies provider, can be expensive. Experience shows that it is vital to separate finance arrangements from your suppliers, as this can often muddy the waters of your relationship. We offer a flexible approach to equipment loans that can be moulded around your particular situation.

As many businesses have found out to their detriment, if you struggle to maintain payments on a particular piece of equipment, the supplier may limit access to all equipment/supplies. This could have a knock-on effect on your business, cash flow and ultimately cause severe financial/reputational damage. Where applicable, we can arrange financing in principle before you purchase the equipment, thereby putting you in the position of a quasi-cash buyer. Cash will always be King in the business world, opening the door to potential discounts and even additional items/services.

Small business loans

As we all know, from small acorns can grow mighty oaks in the world of business. Here at Alternate Finance, we provide a flexible small business loan service that is perfect for smoothing out lumpy cash flow or providing access to funding at relatively short notice. While we have strict lending criteria, we will learn about your specific challenges and appreciate the financial requirements as the relationship grows. Unfortunately, as we touched on above, many commercial banks are going in the opposite direction, looking at customers as a number as opposed to a potential long-term relationship.

Even if you have no short-term finance requirements, it is helpful to approach second-tier lenders NZ and lay the foundations of a long-term relationship. We can help with business plans, financial calculations and finding the best loan terms for your situation. Remember, as we take a long-term view of new customers, it is in our interest for your business to be successful.

Bridging loans

Bridging loans can be a godsend when you are looking to sell one asset and acquire another simultaneously, often property. These short-term arrangements can be used to fund cash deposits on property purchases before they are financed. In most cases, as a responsible lender, we will require a degree of security – this is usually right in front of us. The property or equipment you are buying!

Before looking to secure a bridging loan, it is crucial to have both an entrance and an exit strategy. In addition, interest rates on bridging loans are by definition relatively high because of their short-term nature. Consequently, you must look to repay any bridging finance as soon as possible.

Venture capital funding

In many ways, we have left the best till last for entrepreneurs and growing businesses. Venture capital funding is often seen as aggressive, often favouring the lender and failing to reflect the long term prospects of the customer. In reality, this could not be further from the truth.

Here at Alternate Finance, we have contacts in the venture capital industry looking to invest in growing businesses. Our finance partners tend to offer more than just your traditional funds with many packages, including mentorship, shareholder agreements, future funding requirements and active roles in the business. Those who have started their own business will be well aware that the boardroom can be a very lonely place, especially when things are not going to plan. It can be invaluable to have someone to speak to, a mentor, who has been there, done it and lived to tell the tale.

Respect debt, and it will be your friend

In reality, very few businesses can go through the start-up process, initial growth, and then long-term expansion without the need for external funding. While some business entrepreneurs have an aversion to debt, it will be your friend and can be very lucrative if you respect it. We prefer to look at long-term arrangements with our customers, taking an active interest in the business, together with short, medium and long-term plans. This means that we already have a relatively good understanding of the business if finance is required at short notice.

The value of debt is relatively easy to calculate. If you take on $10,000 of debt and can create $20,000 of profit, then it is a no-brainer. However, if you are taking on debt just to “shore up the business” you may need to take additional action to secure a long-term future. Throwing good money after bad with a struggling business, with no appetite for restructuring, is a recipe for disaster. If it isn’t working, change it!

Be realistic

While many entrepreneurs will look to start their own business, unfortunately, the vast majority will fail in the first couple of years. Those companies looking to prosper, and grow, are the ones that bring in expert advice where they have no experience. Smart businesses/entrepreneurs will bring in strategic finance partners to ensure that funding is available at relatively short notice. While many commercial banks have dismissed the concept, there is still a lot to be said for a personal relationship with your company lender.

Commercial relationships don’t happen overnight

Over the years, we have built up many long-term relationships with commercial operations, leading them through the start-up process, on to expansion and long-term growth. Some arrangements are purely financial, while others have morphed into joint ventures. As we have mentioned on numerous occasions, we prefer to work on long-term business relationships. The more successful you become, the more chance of using our financial services, which is a win-win for all parties.

That “once in a lifetime” business idea may tempt some lenders, but we are a responsible company. We don’t see customers as numbers, we see them as people and businesses, but there also needs to be a degree of security for some financial services. If you survive the initial start-up period and move on to the expansion phase, you may eventually look towards venture capital funding to take you to the next level. As it says in the title, smart businesses have strategic finance partners/business lenders from day one – is that you?

Mark Benson

Mark Benson, a renowned and astute stockbroker/financial adviser spending the majority of his finance-related career operating in the United Kingdom. With 16 years+ experience in the financial sector. he still maintains a strong interest in all things financial. Over the years, he has written about subjects such as property finance, loans, pensions, insurance, stock market investments, tax planning and more. Mark believes it is essential to keep up with the latest financial regulations and adapt your finances accordingly, something he portrays in his financial articles.

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