4 questions to ask every new small business client
What’s the first thing you do when a new client asks for your help in securing financing for their small business? It can be tempting to try to impress your new client by listing all of your services and jumping straight into a loan application. Fast service can show your client how eager you are to help, but jumping in too quickly can risk wasting your and your client’s time and energy on deals that won’t work out in the end.
Here are four questions to ask every new client who walks through your doors. Knowing the answers before you start looking for the best financing option for your client’s small business will make your job easier.
1. Do you have a business plan?
Not all lenders require a formal plan, but your client should be able to clearly articulate how the loan will help their business. Will the extra capital allow them scale up faster? Are they purchasing a new piece of equipment? Or, do they simply need short-term financing to bridge a gap in revenue? Make sure your client can clearly identify their business’s competitive advantage and market opportunity.
2. Do you have all the necessary paperwork?
While you no longer need ten pounds of your client’s financials to apply for a business loan (phew!), lenders still require a handful of supporting documentation to process loan applications. The actual materials will vary depending on the lender (here’s a checklist of documents we ask for in our 10 minute app!), but generally the list includes proof of ownership for assets, a couple years of tax returns, and recent bank statements. More traditional lenders may even ask for documentation that validates the market opportunity or demonstrates your client’s business acumen.
Regardless, the best thing you can do to speed up the process is to make sure you have all of your client’s documents securely stored in one place before you begin the application. Intuitively labeling the supporting documents you submit will also make it easier for your underwriter to review your client’s application and make a fast decision.
3. What’s your credit score?
While it’s not the only thing a smart lender will look at, a business owner’s credit score is an important indicator of their creditworthiness. You can help them check their credit score using a free, online service like Credit Karma. If they notice any errors, advise them to contact the credit bureau to resolve any issues before you submit any loan applications.
As a general rule, a FICO score above 700 will put your client in a strong position to receive an offer for an affordable loan. If their score is below 600, consider advising them on ways they can improve their credit score before applying. They’ll be more likely to return to you when it’s time to refinance, if you show that you want to help them qualify for a more competitive rate.
4. What rates and fees can you afford to pay?
Interest rates fluctuate widely depending on a number of factors, so it’s important to keep all the moving parts in mind as you look for the most appropriate financing option for your client. Their credit score certainly influences the rates they’ll be eligible for, but the type of financing, the term of the loan and any collateral requirements can also impact the final cost to your client.
For example, shorter loans with daily repayments based on the cash flow of a business tend to be quite expensive, while longer term loans with monthly repayments are usually much cheaper. Helping your client calculate the APR of various loan deals so they can compare their options is one way you can show them you’re working to get them the best deal out there.
Now it’s your turn to answer
Who is the best lender for your client? This is the question you’re ultimately there to help answer! Traditional lenders like banks and credit unions may have competitive rates, but they require an impeccable credit history and their process can drag out over several months — not ideal for your clients that want to jump quickly on a new business opportunity! Merchant cash advance lenders offer businesses lightning fast access to capital, but it usually comes at exorbitant rates and with a stifling amount of fees.
These options might work out for a few of your clients, but why compromise when marketplace lenders are able to offer you and your clients both a low rate and a short turnaround time? Funding Circle is an online marketplace that uses cutting-edge technology to cut out the middleman and connect supply directly with demand for a fraction of the cost. We may not be the answer to every question, but with funding in as few as 10 days and rates as low as 4.99% you’ll be glad you asked.
Give your clients the answers they’ve been looking for. Become a Funding Circle Referral Partner. Join today!