Three Ways Accountants Can Help Their Clients Secure Business Loans

Apr 21st 2015
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According to a 2014 IBISWorld report, financially cognizant companies are increasingly turning to their accounting firms for advice on how to better run their businesses. Because accountants are among the most trusted business professionals, this puts them in a positive light for offering additional advisory services to clients.

As a professional intimately familiar with a business client’s financials, stepping beyond tax prep and bookkeeping into a consultant role makes sense for both the client and your accounting practice. Offering business advisory services not only allows you to deepen your relationships with current clients and help retain them, but also can distinguish your practice from other accounting competition when growing your firm with new clients.

No matter where your firm is on the business advisory track, one key stop is that of offering clients assistance in securing a business loan. This type of service is of value to small businesses especially, as some business owners may not know the most effective way to showcase their company to a financial institution.

According to data from Sageworks Bank Information, small business loans outstanding totaled $12 billion more in 2014 than the previous year, marking the first annual increase since 2010. As of the close of 2014, US banks loaned small businesses more than $630 billion. If your business client is seeking funding, you can help.

There are three key ways accountants can assist their clients in securing a business loan.

1. Qualification. An important value-added service accountants should provide is to help the business owner qualify their needs – to articulate the purpose of the loan and to consider various options for financing, including whether a bank loan is even desired or necessary. Many borrowers that approach lenders are unable to articulate how much they need and why, and that can be a major turnoff to banks.

As a trusted business advisor, you can assess how to proceed by considering the lifecycle of this particular business. Will this loan serve as startup funding, or is the business in growth mode? Is there a major change on the horizon for this business, such as succession, or a potential sale or acquisition? The accountant’s knowledge of various industries and how or why they use various forms of credit can also be helpful in determining whether a bank loan is necessary or whether another form of credit, such as factoring, would be appropriate.

2. Quantification. Once client needs and options have been qualified, accountants can help in the next phase of winning a loan: quantifying the current financial condition and the credit need, as well as helping identify repayment sources. As an accountant, you’re in a unique position to offer both a narrow-focus and 50,000-foot view of a company and its operations from a financial perspective. Clients will see the real value-added in this service by translating what the numbers mean now, what they mean for the owner’s goals, and the implications for seeking a business loan.

For example, showing the client data on the company’s recent cash flow and projections for upcoming periods – with or without external financing – may help determine the size of any loan requested. You can also provide industry benchmarks to the client for credit metrics, such as debt-service coverage or liquidity ratios, to show how they stack up and how they may be viewed by lenders.

Helping a client test the business-loan waters by offering this data can bring some peace of mind to a potentially frazzled business owner. According to a small business survey conducted by Sageworks in 2014, nearly one-quarter of respondents said they did not apply for a business loan because they believed they would not be approved. If your review uncovers potential roadblocks to getting a loan, you can help the client address those before they approach a bank.

3. Presentation. Finally, you can help clients put together the information that will improve the chances a bank will approve a loan request. In the current banking environment, many financial institutions require reviewed or audited financial statements. Knowing this, you can help your client be proactive.

An important next step is to walk the client through the lending process from the financial institution’s perspective. The lender wants to know who’s borrowing the money, can they repay it, and whether the bank is protected. Helping clients pull together the collateral they need, along with providing background on the loan application process (such as explaining the 5 C’s of credit for banks), makes their life easier and helps them feel prepared for that walk to the bank. You can also answer questions related to evaluating and, perhaps, negotiating terms of the loan, such as those related to minimum capital requirements.

Accountants have the skills and perspective to help business clients as they consider and apply for a loan. Business clients need assistance qualifying their financial needs, quantifying current and projected performance, and presenting a winning loan package. Helping them through this type of endeavor is one example of how accountants can help clients solve problems and offer value-added business advisory services.

For more detailed information on this topic, download Sageworks’ complimentary whitepaper, Help Business Clients Win Loans: The Accountant's Guide. If you’d like to offer your clients basic information and advice on getting a loan, download or send them a link to the free whitepaper, Top Tips for Getting a Business Loan.

About the author:
Natasha Closs is director of ProfitCents Consulting and Advisory Services at Sageworks, where she manages a team of consultants and support staff, guiding them on training methods, implementation techniques, and strategy for accounting firms. In addition, she is responsible for teaching the Sageworks NASBA-accredited online Continuing Professional Education (CPE) courses.

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Rowan Webb
By Rowan Webb
Jun 9th 2016 03:29 EDT

I am so glad for my accountant. I have my own strengths when running my car finance business, but it's good to be able to have someone trustworthy in the background that I can pass a lot of my stress and worry to when it comes to managing the company accounts so I can focus on sales and speaking to customers and getting them the help that they need! It might take a while to find someone that you can trust to work on your company books, but when you do, make sure that you treasure them and do what you need to to ensure they keep working for you!

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