How to build and maintain a good lending relationship with financial partners
Maintaining a good lending relationship with financial partners requires communication, knowing your loan agreement, and referrals. It goes without saying that maintaining a good relationship with lenders can be beneficial for businesses. But how do you do it? Kore Capital outlines the following tips to enhance your lending relationships using Factoring. Factoring is a form of debtor finance. With factoring, businesses can sell their accounts receivables to factoring companies at discounted rates to receive capital.
Communication
Lenders like to be in the loop, especially with major changes or upheavals in their clients’ businesses. Maintaining communication, especially from senior management, regarding the critical changes or events that may affect the business is recommended.
Mutually beneficial relationship
Maintaining a positive and mutually beneficial relationship with the lending institution is integral for business success. Businesses and their lenders/banks must be invested in each other’s journeys, successes and failures for an ideal lending relationship. Once a business receives a loan, it is also important that they support their lender through ancillary businesses including credit cards and cash management.
The loan agreement
The loan agreement between a business and lender might be long and arduous to read, but it is highly recommended to do so and more importantly, understand it. Businesses must be aware of the financial and affirmative covenants outlined in it and more importantly, stay compliant with the terms prescribed.
If you have the resources, it may help to hire an expert to understand the loan agreement and develop a plan to monitor activities in order to stay compliant with it. While you may think it is important to consider calculations for the present term, the truth is your project performance and growth for the next four quarters must also be part of the understanding to stay compliant with the agreement. This is especially true if the loan agreement has restrictions on distributions, capital expenditure, or acquisitions.
Referrals
The banking and financial sector, especially lending, is based on trust and reputation. As a business owner, if you think your lender or bank is working well for your business, refer them to others. This can help develop your lending relationship greatly and encourage your lender to go an extra mile for your business.
For more information on how to improve your lending relationship through factoring, contact Kore Capital today.