Securing Growth Finance: 10 Guidelines For Mid-Size Retailers

  • Written by  Rob McMahon, Senior Managing Director, GE Capital, Corporate Retail Finance

VP GE CAPITAL image FVThe nearly 200,000 companies that comprise the U.S. middle market continue to prove their vitality. According to a Q4 2013 survey of 1,000 CEOs, CFOs and other C-suite executives of mid-sized companies, conducted by the National Center for the Middle Market — a partnership of The Ohio State University Fisher College of Business and GE Capital — the majority of retailers who responded are somewhat confident in their outlook of the global economy.

In fact, the percentage of retailers who are “not confident” in the global economy decreased sharply to just 12%in the Q4 2013, compared with 33% in the period a year earlier. Looking closer to home, 64% of retailers surveyed during the Q4 2013 are confident or somewhat confident about the outlook for the U.S. economy, a substantial increase over the 51% who shared this sentiment in the Q4 2012.

Of course, retailers are not immune to economic headwinds and other business challenges. Concerns about healthcare costs remain a vexing problem for retailers, along with uncertainty over regulation and economic turbulence.

Still, retailers are also contributing to middle market job creation, with employment growing 2.2% in the fourth quarter. Looking forward, they forecast employment growth of 2.2% over the next 12 months, compared to 1.8% the year before.


Given retailers’ upbeat views on the economy, they very well may be looking to invest in their businesses — and this coincides with today's favorable lending environment. Lenders who understand the middle market are eager to put their money to work and help these companies grow. That said, every situation is unique. Here are 10 guidelines for borrowers to be more successful when seeking financing.

1. Think ahead
The best time to approach a lender is before your company needs capital. Putting time and effort into building a relationship and educating a potential lender about your business prior to applying for a loan can have a big impact. If you wait until your company needs money in a hurry, financing options may be limited.

2. View the lender as a strategic supplier
Relationships matter. You and your lender should work with a set of shared goals. Seek lenders with a "builders" mindset that want to help grow your business.

3. Be upfront about your challenges
Trust underlies all credit relationships so don't sugarcoat your challenges. By being upfront and communicating clearly with the lender, both parties can avoid wasting valuable time and resources. The lender is also better equipped to design solutions.

4. Polish your narrative
Every business has a story. Tell your organization's story in a way that highlights successes and acknowledges challenges. Create a forward-looking business plan. Organize your financials and be sure they align with the story.

5. Get detailed about details
Mistakes in documents, even if they seem inconsequential, can cause the lender to lose confidence in you and your business. Demonstrate you understand all the key terms in covenants, contracts and credit documents. Be prepared to show specifically how your company will meet its commitments.

6. Find a lender with industry specialization
A lender with experience in the retail industry will better understand your business plan as well as your competitors' positions in the industry and the challenges they face. That knowledge will be helpful in structuring the financing solution and maximizing the credit available to you. If your business has seasonal highs and lows, which is common in retail, work with a lender that understands your fluctuating cash flows so that it can structure payment plans accordingly.

7. Keep lines of communication open
A lack of communication can damage financing prospects. From day-to-day details to big changes, keep the lender informed. If an unexpected event occurs, contact the lender as soon as possible and explain its impact on your company's ability to meet its financial obligations. Advance warning helps the lender to be as flexible as possible.

8. Put yourself in the lender's shoes
Think with the mindset of both a borrower and a lender. Whether the discussion involves a credit line increase or a new competitive challenge, understanding the lender's thought process and considerations will lead to a more fruitful interaction.

9. Learn from others
Learn about your competitors' financing structures. By taking the time to do this homework, you can improve your discussions with lenders while increasing the chances of finding a workable financing solution.

10. Optimize the cash flow
Cash flow is king. A lender needs to understand all monies coming in and out of the business as well as payment histories. To impress the lender, executives should demonstrate ways they're trying to increase cash management efficiencies.

Having the processes and procedures in place to follow all 10 guidelines consistently is not easy, but the effort is worthwhile. Doing so will lay the foundation for a solid, long-term borrower-lender relationship.

Rob McMahon ( is Senior Managing Director, GE Capital, Corporate Retail Finance, specializing in serving the financing needs of specialty retailers.

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