How to Pick a Trusted Financing Advisor

Many business owners and financial executives want to ensure they can rely on an independent ‘trusted’ financing advisor when it comes to their business finances. How does one pick such an advisor? Naturally in today’s environment business owners don’t have time to waste, and if they have financial or growth challenges they are looking for someone that can bring expertise and solutions to their business.

We are constantly told that business owners are looking for a firm they can trust, respect, and has, of course, credentials.

We believe this whole area of developing a trust between the advisor and the company is a two way street. It is incumbent on the business owner to make sure the goals and needs of the company are made very clear. Business owners or financial managers should not blur the issues to the point that each party does not understand the goals and the respective roles.

When a trusted financing advisor is chosen he or she needs to be given access to the reins and information on the business and its challenges.

Business owners need to ensure that the specialist firm they are dealing with has experience either with the challenges they are facing, or the particular industry the customer is in. Many business financing challenges are industry specific, so this is not the time to be training and advisor on your business! Most people realize though that many financing challenges are somewhat generic in nature, so although an industry expertise is often helpful, it is clearly not always 100% required.

The business owner and financing advisor need to be able to have effective dialogue and communication on what the operational and financing issues are. Many times there are what we call ‘ warning signs ‘, yet in other cases companies are already clearly in trouble.

A financing advisor needs to be given information and clarification on issues related to:

- Sales
- Profits
- Currenet lenders
- Working capital issues
- Asset issues
- Future goals of the company

Naturally the above list is hardly all inclusive, but it is a solid start to the dialogue. The business absolutely has to have a handle on what the intermediate term goals are. Management needs to have a strong sense that the business advisor can assist in the recovery, and the advisor must be given the tools that he or she needs.

Both the business owner and advisor should have frank discussions around the probabilities of success and the timelines associated with that success. What’s realistic, what isn’t.

Business owners and financial executives should clearly check the background and experience of the advisor. References are of course highly recommended. Professional affiliations are of course important, but not critical. References from lawyers, bankers, and accountants are often excellent sources of information. The business advisor should clearly be indicating they have the right attitude and credentials around the business owners financing needs. It is certainly not unrealistic to have solid discussions around timelines and action items responsibility.

Ultimately business is of course people, so chemistry is important, and the business owner should have a sense they could work with the financing advisor. However, at the end of the day you don’t have to like people to get the job done ( it certainly helps though!). Credibility and experience are ultimately always at the top of the list.

All engagements should of course be documented properly re success, work fees, etc. A credible business financing advisor will of course be willing to sign any required non-disclosure document.

In summary, a trusted business financing advisor is a valuable ‘ out of the company ‘ asset to any firm. Business owners and financial mangers should choose such an advisor carefully, and pay important attention to the qualities and capabilities that advisor can bring to the table, and ultimately, the firms success.

Reasons to Finance (Not Purchase) Equipment

We are continually told there are significant benefits to lease (finance) equipment purchases in a business. Let’s examine some of those benefits.

Economic stat’s tell us the equipment leasing and financing in Canada and the U.S. totals Billions of dollars. Historically almost 1/3 of all equipment has been financed, not purchased. We will look at some of the true benefits of leasing – every benefit many not necessarily accrue to every firm who finances, but many will, and the business owner or financial manager should understand how his firm can benefit from this financing strategy.

When we break down the benefits of leasing into a large number of single positive points we find that these benefits can be simply grouped into a number of key categories. They are as follows:

*Business in general find it easier to account for leases – payments are fixed

*Leases can be structured to have the business own or not own the equipment at the end of the term of the lease

* Many businesses are either incapable, or do not choose to address the technological aspects of the equipment they are financing – Leasing gives them maximum flexibility in that area. For example a company leasing technology generally wants to use the technology, which evolves. It does not wish to purchase or lock into ownership of technologies that are evolving. Think computers!!

* Lease financing has maximum cash management flexibility – payments can be tailored with longer amortizations, seasonality according to the customers business, fixed regular payments ( term loans tend to have variable, not fixed rates ) etc.

* Budgeting: More often than not this is usually the main reason most customers give for financing equipment – the financing provided during the leasing exercise allows the company to potentially acquire more equipment than it might have in a straight ‘ purchase’ scenario. In many cases little or nominal down payment is required. The vast majority of customers also pay the taxes on the equipment and maintenance via the fixed monthly lease payment. Companies that are either growing quickly, or in some cases are having some level of financial challenge will always tend to gravitate to the leasing solution.

Lease financing has always been perceived as a strong financial acquisition alternative. In the economy of 2009-2010 where ‘ cash is king ‘ alternative financial such as the lease option is a strong