You
probably never heard the word “fundability” in an elementary English
class. Nor, did you hear it in high school and probably not in college,
either. Yet, this fairly-recent business term is of critical importance
if you ever intend to secure financing for your small business.Simply put, fundability refers to how investors, lenders and other potential partners view the risk of extending credit or services to your business. It’s basically the business version of creditworthiness. For example, an investor will want to assess your business’s revenue prospects prior to pumping $100,000 into it, just like a bank will evaluate your payment and salary history prior to issuing a $40,000 auto loan.
So, we’ve discussed what fundability is. Now, let’s discuss a few factors that potential partners consider when making their determination.
Bank Relationships
Lenders often want to review your business’ bank relationships before extending credit. They may take factors such as account age, account history, balance rating and others into consideration.
Experience
When you apply for a home loan, lenders want to know how long you’ve worked in your current industry. They do so because the more experience you have, the more likely you are to retain your job or find a new one.
This logic comes into play when determining a business’ fundability, as a company that’s been around for 20 years is more likely to produce steady revenue versus one that opened six hours ago.
Industry
Due to various factors, some industries perform better than others as time goes on. And, potential sources of credit realize this and adjust their decisions accordingly....More
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