3 Ways to Get Your Small Business Clients Ready for Financing

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Head of Market Education
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Research by the Federal Reserve has found that accountants are among the top sources of financing advice for small business owners. It has also found that for many, searching and applying for funding is a frustrating process.

For example:

  • Businesses spend on average 26 to 33 hours searching and applying for financing.
  • 71 percent of small business owners (nonemployer firms) report a financing shortfall.
  • 21 to 33 percent of business owners don’t apply for financing because they are discouraged.

But there are ways to make the process easier, increase the likelihood of success, and make you look like a superhero in your clients’ eyes:

1. Help Borrowers Prepare Lending Documents

One way is to ensure that the business owner is equipped with the kind of documentation lenders are likely to request during the application process. Having this information ready to go will not only make applying for financing faster and less frustrating, it increases the number of types of loans for which the business may be eligible.

And as an accounting professional, you may be in a perfect position to help here. The documents clients gather and turn in to you at tax time, and the products that you produce for them, are often the same documents lenders will require.

These include:

  • Business bank statements
  • Tax returns
  • Profit and loss statements
  • Pro forma projections

Not every lending option will require each type of documentation. For example, those offering merchant cash advances or cash flow financing are primarily interested in the firm’s credit card receipts and/or bank deposits. Banks, on the other hand, typically require a more traditional “complete package,” including the documentation listed above.

2. Turn Tax Returns Into a Financing Discussion

Your clients may welcome the opportunity to schedule a discussion about financing needs after the urgency of meeting immediate tax deadlines has passed. You’ll be in a great position then to move onto the next step.

Review the tax forms you’ve just prepared and offer additional services:

  • Preparing the financial documents they need to pursue financing.
  • Offering insights into potential lending options.
  • Reviewing offers they receive to make sure the loan terms are financially sustainable and that loan proceeds will be put to good use.

The latter task is a particularly valuable one. Unlike consumer lenders, commercial lenders aren’t required to disclose an APR in conjunction with a small business loan.

Some lenders mask the cost of expensive loans using confusing terminology, and it’s easy for entrepreneurs to get trapped in loans they can’t afford. An accounting professional who isn’t afraid to dig into the numbers may be able to sound warning bells before it’s too late.

3. Give the Credit Advantage

Discuss the importance of building good business and personal credit with your clients. Federal Reserve research found that among very small businesses (nonemployer firms), low credit scores were among the top two reasons firms were not approved for credit.

Additionally, the Nav American Dream Gap Survey found that business owners who understood their business credit were 41 percent more likely to be approved for a small business loan. That’s a competitive advantage many entrepreneurs would love to have – and should have!


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