The next time you need a loan to start or improve a business, take a look at lenders which specialize in your particular industry. You may find a more receptive audience with professionals who are familiar with your industry and its unique structure.
Financial products that specifically address the unique characteristics and needs of a certain industry form a necessary niche in business lending. Loans that are industry specific usually have modifications in the areas of approval criteria, requirements for collateral, and expenditure allowances. Here are some key positive features of industry-specific loans.
Familiarity With the Industry Itself
When you are applying for a business loan from a general lender, you may need to do a good deal of explaining about your industry and what elements are important to it. Even though you present a detailed business plan to the lender, they may not understand why some expenditures are necessary for your business to move forward. This may necessitate you selling your idea to the banker, and taking up your valuable time.
An industry-specific lender, on the other hand, will more readily understand your business plan and know why some specialized expenditures are so important. They are also savvy to the best practices and trends in an industry, so they are more accepting of an innovative business idea when it is backed up with solid planning particular to that industry. This increases your chances of funding success.
Individualized Collateral Options
The ability to put up collateral is a positive step in being able to qualify for any business loan. Industry-specific loan programs will be familiar with the floating assets, which change in value over time, specific to a particular industry. For a retailer, a floating asset may be inventory, but for a medical provider, that could be examination tables or imaging equipment. An industry-specific lender will better understand the nature of the collateral and be able to offer a more robust loan value as a result.
Medical provider loans have saved private medical practice businesses from closing and are often crucial in covering daily expenses that keep mounting even though insurance reimbursements are late and have declined overall. In addition, medical practice loans have become a major way to finance upgrades in equipment and expand practices.
Industry Growth Fuels Approval Rates
No matter what the industry, a lender will want to see detailed financial records and will favor a good owner credit history when considering funding a business loan. For a lender who is industry specific, growth in even niches of an industry can also be a factor in fueling higher loan approval rates because the outlook is trending upward. Even though the construction industry is picking up overall, there are still seasonal fluctuations and accruals of expenses that necessitate a loan to even out cash flow and provide working capital.
For construction industry lenders fielding loan requests in these types of situations, they will still provide strong approval rates. This is because they understand the seasonal nature of the business and the need to spend large sums of money on construction projects before they are paid in full. Strong industry positioning can also be a catalyst for a construction business to invest in more modernized equipment or additional employee training.
Knowledge of Unique Needs
The unique needs of an industry may be the biggest motivator in seeking out loan providers that understand the unique needs of your business. The agricultural industry has long relied on farm loans to fund and grow their businesses. Whether it is an enterprise such as a farm or ranch in the early stages of planning or an agricultural concern that is planning a new direction for sustainable crop production, these loans can provide needed cash flow under a variety of terms. Everything from paying the expenses of harvesting crops or feeding cattle to equipment upgrades and expansion of herds can be covered by this industry’s specialized lenders.
The next time you need funding for your small business, look for a lender who is specific to your industry and see the difference it makes to have a lender with specialized knowledge of your type of business. You will most likely find an ally for your efforts and a true partner in getting you the resources you need to be successful.