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When businesses are looking for financing options for business expansion, capital expenditures or a new project, it pays to consult with a trusted advisor. Jason Fallscheer, Client Director at Pitcher Partners, explains why.
Australia’s banking and financial environment has changed considerably over the past twenty years. With the exit from the sector where the big four banks provided the lion’s share of financing, many other banks and alternative financing channels entered the market.
While risk appetite has shifted among some banks in recent years, there is still a risk appetite in the market for other fund providers, creating healthy competition and an opportunity to ensure your business financing is structured appropriately.
In merchant banking, it used to be the norm to have the same professional oversight for several decades, but this culture is changing. While this is still the case today for some business owners who go through their bank for all funding, we are seeing an increasing demand for a trusted single point of contact for finance outside of traditional channels.
“Having a trusted advisor on board to leverage their experience dealing with a wide variety of sponsors can be invaluable.”
– Jason Fallscheer, Pitcher Partners
Seeking the advice of a broker does not necessarily mean that you will leave your existing bank. Businesses want to know they are getting the best options available in the market to ensure they are focused on growth without compromising financial stability.
Sometimes it will be beneficial to secure finance through your current lender and at other times it may be more appropriate to access other sources of finance.
These scenarios, where businesses are looking for other financing options outside of their established commercial banking relationships, are occurring more often, especially in the real estate industry or in transactions where traditional sources of financing may not be willing to take the risk to fund activities.
Importantly, just because one financier kicks you doesn’t mean it’s time to wait for your usual lender to change. In these cases, it’s usually a good time to explore your options.
There is a large market of private lenders in Australia who can fund projects, especially when the risk appetite of major financiers in traditional channels means your project or transaction may not go ahead. These donors don’t advertise, so it’s a network you have to tap into with the support of an advisor.
While you may pay a slightly higher rate with these channels, you need to weigh the opportunity cost and the risk of delay for the long-term viability of your business.
The role of a trusted advisor
A big part of what trusted advisors do is show businesses what is possible and available in the market. It’s not always through exploring different financing options. Sometimes businesses need a trusted person to discuss their current arrangements and provide an independent view of how things are structured.
Being a good sounding board for business owners, understanding where they’re coming from, what their challenges are, and what their goals are in the short, medium, and long term is valuable to these people, especially when so much of a business’s success depends on how their financing is structured.
Now more than ever, it is crucial to understand how to best structure project financing and transactions for long-term financial stability. There are several factors to consider depending on the climate in your sector, the current financial structures of your business and the long-term goals of your business, so engaging a trusted advisor who can use their experience in dealing with a wide range of investors can be invaluable.
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