Growth Capital: The Big Picture for Small Businesses
by Michael Dinkins, President and CEO, Dinkins Financial
There are two angles in the quest for capital
I have been there – in a chair across the table from a team of bankers who were about to make a decision on a loan. Those pivotal moments stirred up a perfect storm of hope and angst. Would they approve my request so that I could move the business forward – or would they offer a restructured deal with terms that would take every dollar of cash flow out of the business and leave me with no ability to turn things around? I’ll tell you what happened later on.
I have also been on the other side of the table – as a lender – where it was my job to determine the value of collateral versus the amount of cash we would recoup without risking additional exposure. During meetings, borrowers invariably started making their cases, but I didn’t need to hear it. The numbers and projections were right in front of me. This was business. And since decisions on other loans had to be made the same day, many within the same hour, I had to decide and keep moving.
As I look back, I remember very well what it’s like to be a borrower, and I have never forgotten the mindset of a lender. In fact, I make it a priority to help small business owners understand borrowing from a lender’s perspective. These insights are a small business owner’s keys to success, or the Big Picture in gaining access to growth capital.
Focus on a path to success
How do you ensure a successful borrowing experience? King Solomon’s advice to a young man was to avoid the wrong road. Take a different path. My advice to business owners seeking capital is the same, because it’s not possible to avoid the consequences of not making loan payments on time.
The answer is to have a sound, realistic plan of execution in place before you borrow money, so that you will be able to repay it and create value for you, your business and family.
This is how Dinkins Financial differs from other financial services providers. We never want a client sitting at a table where lenders have the upper hand in deciding their future. We ensure our clients are well positioned and prepared to request capital, respond to lender questions - and most important, execute strategic plans.
Know in advance what you will do with your funding
It is worth repeating that successful borrowers have a plan of action and a sense of urgency to get started. They build trust with their lenders and are intent on having ongoing, constructive dialogue with them. Lenders have company performance metrics, growth plans and projections in hand. Everyone is aligned on the same page.
The Dinkins Financial Advantage —
A structured 4-step process
Small business owners who get loans approved invest serious time and thought into a professional business plan. Instead of buying how-to books or turning to online resources, they seek guidance from an industry insider to build a solid plan. Dinkins Financial helps business owners build plans that create a financial footprint allowing you and a potential lender to see realistic projections showing how the return on growth capital will exceed the cost of your loan. Most important, the plan also contains your W3 Plan so that you have confidence and foresight into your company’s future – What needs to happen, When it needs to happen, and Who will do it.
The biggest reason small business owners fail in securing capital is by not providing all of the data lenders require to make lending decisions. Necessary information includes business and personal tax returns, business and personal bank statements, balance sheets, profit and loss information, investments, credit issues and resolutions, mortgages, and other documentation. We move you through a check list to get the right data assembled in advance of approaching a lender, and we thoroughly prepare you to answer their questions.
#3: Right-Fit Lender Matching
We now understand your business, your business cycle and capital needs, so we pick up the phone and call a lender we know is a good match for your business. We share an overview of your company so the lender can decide whether to pursue the opportunity. When they say yes, you move to the front of the line and we set up a conference call with you and the lender. Before taking this step, we prepare you for what to expect and help you understand the lender’s point of view, so that you will find more empathy and richness in your interactions with them. This understanding allows you to recalibrate your approach and satisfy a lender’s needs to the extent they become your champion, helping you through the approval process.
As your advocate, Dinkins Financial works with you and the lender to make sure your funding will allow you to execute your W3 plan. If you need equipment, we make sure it is included in your funding request. Most important, we ensure your loan covenants match your business cycle. If your cycle is 6 to 9 months, covenants such as Minimum Net Income cannot increase two or three months after you secure a loan. Covenants must allow you and your business sufficient time to execute.
#4: Post-Funding Consultation
After a business is funded, most financing providers consider their job complete and don’t want to hear from you again. This is not how Dinkins Financial operates. We are committed to your long-term stability and future capital needs. We encourage you to pick up the phone and talk with us about your progress, ideas or challenges. If we can be of assistance, we will. We also encourage you to join The Dinkins Edge, where you can network with other business owners and help those who are on the growth capital journey you just completed.
How our process works to your advantage
I began by telling you of my own experience as a borrower. It was many years ago. One sunny day as I walked into the office, everyone was enjoying “Bring Your Kids to Work Day.” It was nice seeing the happy, curious faces of children whose pictures were prominently displayed on their parents’ desks. It was also rewarding to see parents get to be hero for the day, sharing with their children what they did for our company and how they did it.
It felt good. It made me think back on my meeting in New York, where I sat across from my lenders. I said “no” to their restructuring proposal. Then I asked for a 10-minute break to give them time to calm down before I made a counter offer. I countered the bank’s restructuring plan with our thorough, thoughtfully prepared plan for growth. It took a few months, but the loan was approved with our desired terms and covenants. When we received the funding, we immediately began executing our plan. Things had worked out. We were growing again.
Today, Dinkins Financial is built on the same principles and processes I learned as both a borrower and lender. They are proven. They work. And they are available to small business owners who want to grow and succeed.
Together we can find the right lender for your business and navigate the approval process. It will take some work, but there is immeasurable value in doing this the right way – the first time – with your Big Picture front and center.