How do You Obtain the Best Financing?

Your plan of attack depends on what kind of borrower you are. 

My perspective is as an attorney and an adviser representing solely petroleum wholesalers and retailers in securing financing.  In this capacity, I am approached by three general categories of borrowers, each with their own particular challenges and methodology for accomplishing their financing goals.

Those borrowers who have their financials in good shape, are well within their current lender’s guidelines and ratios, and have a good business plan for future acquisitions and financing. 

The focus then is a quality presentation that fully explains their business and goals to a full range of lenders in order to obtain a good match with the right lenders at the best competitive terms. 

Those borrowers that have a failing business model. Their financials are not within their current lender’s guidelines and ratios precisely because their business is failing. The issue is not presentation nor is it finding the right lender. Obtaining more funding ( if even available ) without fixing the underlying issues would only put these Borrowers in a worse position: further in debt while their business continues to fail. 

My response to these borrowers is to have them take a critical look at their business model. Review their current lender’s guidelines and ratios, as compared to other lenders.  The focus then is to obtain operational guidance where necessary, take a chain saw to their business to cut out the dead wood (while they have the opportunity, and can still salvage their business), and return to profitability; which will then give them the opportunity for better financing.  Once this is done, the focus is on presentation to a full range of lenders in order to obtain a good match.

Those borrowers who have a solid business model, but their financials are not within their current lender’s guidelines and ratios because their current lender does not understand their business. They may even be currently in lender induced liquidation analysis. 

Since these borrowers have been deficient in the past in choosing the right lenders and explaining their business sufficiently, extra attention must be placed on a quality presentation that fully explains their business. In addition, care must be exercised in selecting potential lenders ( a rifling approach rather than a shotgun approach). 

Our biggest problem in obtaining financing for the petroleum industry is not lack of access to capital, but rather that many lenders do not understand our business. When they do not understand, they will not lend. A solid business model poorly presented rarely produces good results.

At the same time, rates are historically low and lenders are more comfortable with lending to the downstream petroleum industry. This is a time of great opportunity. 

About the Author. 

Corey Henriksen has been involved with CIOMA since the mid-90s when he was regional counsel for FMAC, a securitized lender for the downstream petroleum industry. 

He is Managing Director of Acquisition and Refinance Capital, Inc., a firm founded for the sole purpose of obtaining numerous capital alternatives for wholesale and retail owners and operators in the petroleum industry. Corey can be reached at (949) 481-8500 or www.AcqRefCap.com