Entrepreneurs know few things as well as they know their company’s vision – and they spend countless hours carefully building and rallying their team around that vision. This is one of the foundational tenets of our capitalist system.
The question is whether or not the entrepreneur is able to successfully enlist his or her key business partners in that same vision?
Some vendors or suppliers to a company are no more than simple and uncomplicated providers of what they do. Their service or product being an easily interchangeable one.
But others are more like partners – their service or product being a key component of the business’ success. Relationships between a company and its key partners are often more complicated ones – the success for each being linked to the other.
Take for example a story that is currently in the news – Dell Computer. To some meaningful extent, the success of Dell is largely predicated on the success of its operating systems provider, Microsoft – and visa versa. And while it is certainly true that neither is solely dependent on the other, it is also similarly true that when one thrives (or not) so goes the other – at least to some extent.
The relationship between a new and/or rapidly growing company and its key capital providers is almost always one of partnership – else the success ultimately realized will almost certainly be diminished.
Now there is an important distinction to be made at this point. The phrase “key capital providers” can sometimes include a company’s bank – but it always includes junior capital providers – whether those “junior” capital providers are the owner’s equity, outside equity investors or when banks won’t lend, commercial finance providers.
If you have ever attempted to raise, or indeed have raised, equity from outside providers (venture capital or otherwise), you know that the process is a painstaking one. The reason the process is painstaking is because the investor is asking themselves a simple, yet very consequential question: Am I truly signed up to support this entrepreneur’s vision with my capital?
The same can be said (albeit somewhat less so) when commercial finance is being considered. There are many risks in high growth opportunities and the only thing that is certain is that the future won’t turn out as it was planned. That doesn’t mean it will necessarily turn out worse – only different.
This is why the best commercial finance providers always look, in addition to the value of the collateral they are being asked to finance, towards the vision of the entrepreneur. And they ask themselves the same question: Are we truly signed up to support this entrepreneur’s vision?
If your company is considering commercial finance as means to secure growth capital, we suggest you do the same – only in reverse. Sit down with those you are considering – look them in their eyes – and ask yourself this all important question: Is this firm truly signed up to support our vision?
If your answer is “yes”, you likely have the foundation for a great partnership. If your answer is otherwise, we suggest you keep looking.