There’s no question that the ease or difficulty in securing a business loan is greatly influenced by the sector in which a business operates. Most lenders have approved lending policies for specific sectors that they are aggressively targeting that will also often mean allocated credit teams, streamlined approval processes and very competitive interest rates that all creates a seamless experience for borrowers in the right sectors. So what are some of the sectors that the lenders are targeting?
Healthcare tops the list of industries that most if not all lenders are aggressively targeting. This includes the obvious targets such as dentists and doctors though also extends to allied health services such as physios, chiropractors and optometrists. Lenders take considerable comfort in the revenue generating capacity of the practitioners and borrowers in the sector can therefore access very competitive loan terms in a wide range of situations such as funding the acquisition of another practice, purchasing equipment or funding the organic growth of a practice.
Accounting is another sector where most lenders have a strong lending appetite. Similarly to the Healthcare sector, lenders take comfort in the revenue generation capacity of the practitioners and the level of recurring revenue that exists within a number of accounting firms. Accountants can therefore often access very competitive loan terms to fund the acquisition of another firm or to fund the organic growth of the business.
Recurring revenue is also a factor in many property management businesses that makes it another sector that many lenders have a strong appetite to lend in to. This can be particularly useful for property management firms looking to acquire another property management business or consolidate a number of smaller rent rolls that can often create a multiple arbitrage for a future sale (ie. buy a number of smaller rent rolls on a lower valuation multiple than the larger, consolidated business would be valued at). As in most sectors, not all property management businesses will be viewed equally and the location of the properties, historical level of churn/growth and size/diversification of the rent roll will all be key factors in determining the level of lender interest in providing a business loan secured primarily by the goodwill of the business.
Recruitment is another sector that is viewed favourably by lenders particularly in relation to invoice finance based solutions. Again, not all recruitment businesses will be viewed equally and those with revenues and earnings that are skewed towards temporary and contract roles are the ones most sought after by lenders. For these businesses, the quality of the customer base and number and diversification of temporary placements/contractors will be the key factors in determining a lender’s view on the business. As has been mentioned in other posts, there are a number of new invoice finance solutions available to these types of businesses that can fill the short-term funding gaps with minimal time and effort required.
Any business with commercial property or other saleable assets
Whilst the above sectors are loved by the lenders for the strong revenue generating capacity, predictable earnings on the back of a recurring revenue stream or a high quality client base, the same principles will apply to a number of other sectors. The sector in which a business operates may also become a lot less influential on lenders if the business seeking a loan owns hard assets that are readily saleable including commercial property and a wide range of plant and equipment. Having such security available to back a business loan will enable a more aggressive stance on the part of the lender and more competitive loan terms available. Lenders all have a well developed matrix of loan to value ratios based on the characteristic of an asset that can allow for a seamless loan approval process and business funding on competitive terms where such assets are available.
The above is a cross section of different sectors that lenders have a strong appetite for though this will not apply for all lenders and there is also a wide range of other sectors that lenders are aggressively targeting. CreditSME has developed a detailed understanding and profile of over 50 bank and non-bank lenders in terms of the industries that they are targeting and the most competitive loan terms that can be negotiated for clients in these sectors. Don’t hesitate to give us a call if we can assist your business or clients operating in the above sectors (or any other sectors) to obtain or refinance a business loan on the best possible terms.