By Richard B. Price, Founder and CEO, PQ Capital Suite
Every business owner knows the financing landscape has been turned upside-down over the past 10 years, but not everyone knows how to take advantage of the changes. Middle market companies – typically those with over $10 million in annual revenue – can no longer rely on their local bank to get the best deal. The right deal, with terms that benefit you, may be with a lender you don’t even know yet — and in most cases it will not be with a bank at all.
"Many fintech firms serve small business lending but companies looking for loans between $5 and $50M remain under-served and over-charged. And studies show one-third of the 350,000 companies in this under-served middle market will seek a loan this year. "
You can start by looking for the best deal you can get from your circle. This used to be your bank, but between pandemic impact, inflation, and general economic turmoil on the horizon, that game has changed. Your local commercial bank may no longer be anxious to work with you, but you can try shopping around.
If you’re too busy running your business to comparison shop on your own, you can hire someone to shop for you. Hordes of commercial loan brokers have sprung since the dawn of the pandemic to help middle market companies wade through the bureaucratic paperwork of alternative U.S. government borrowing schemes. You’ll have no trouble finding thousands of commercial loan brokers ready to charge you 2% to 5% to help you find loans of up to $50M with or without government guarantees.
Find the best deal through a tech-enabled marketplace. While nearly all lenders -including banks- offer some sort of online solution to your financing needs, several tech-enabled marketplaces have sprung up to help. Shopping tools like Cerebro let you submit your loan application to a pool of nearly 2,000 lenders split roughly 50-50 between commercial banks and non-bank lenders. Cerebro charges a fee for the use of their tool beyond whatever rate you pay to the ultimate lender. The same is true for RealAtom and iBorrow, both designed for commercial property financing. If your borrowing needs are larger ($50M or more), you have many non-bank direct lenders to choose from such as MidCap Financial, Alliance-Bernstein, and Ares Commercial Finance.
While any of these three avenues can get you the funds you need to grow, there’s more at stake than the money itself. Terms, ease of process, and maintaining control are key to any successful deal so look for options that allow you to pitch lenders that are looking for deals like yours, with the terms and covenants you want. Circumstances vary and the trade-offs are real, but whatever route you follow, be sure to:
In many ways navigating the new lending landscape has never been easier – the resources are at your fingertips. But you need to remember what you want out of a deal, the security you need to get it safely, and the price you ultimately are willing to pay. Ease of use is an added benefit on top. PQ Capital Suite, for instance, offers BorrowPQ, a free online tool that allows you to shop hundreds of interested lenders while keeping your information private. And the tool offers easy-to-use guides to ensure you’re ready to get funded. Best of all – the lender pays the fee. To learn more about how PQ can help you get funding “Pretty Quick,” connect with the author.