Where we differ is when it comes down to the numbers. Conventional lenders use formulas, while development lenders focus on viability.
You’ve probably heard of a formula lender, who uses a set of parameters to compare you against a benchmark and give you a yes or no. The great thing about formula lenders is they are fast with their decision, but the challenge is if you don’t fit their formula, you don’t get approved.
At WEC, we don’t have a minimum credit score for our secured loans and we focus on the viability of your business plan rather than solely on specific criteria. Our loan review process takes longer because we get to know you and your business, so you need to allow more time for a decision.
However, the upside of a development lender is that you may be approved for a startup or growth loan with us even if you’ve been turned down by other lenders.
This can be especially helpful if you’re trying to grow your business but you’re stuck in a ‘cash flow crunch.’ Many of our clients have come to us for loans when they need to purchase inventory or improve their facilities to take advantage of a growth opportunity.
What are the benefits of working with a development lender?
We approve loans in-house which means we can be flexible with repayment options because we get to know our clients and make decisions locally.
As a non-profit, our sole purpose at WEC is to help women build strong businesses. And to improve their chances of success, our loans include free access to a personal Business Advisor, training and mentoring.
All development lenders have a common goal to see businesses succeed, and we work together to refer our clients to the best funder for their needs.
We can also partner with your bank or credit union or other non-traditional lenders like Community Futures, which are located in many rural communities around the province.
For example, we have a joint loan program with BDC (Business Development Bank of Canada), where you may be eligible for up to an additional $100,000.
What’s the downside of working with a development lender?
Most business owners would like a quick response when applying for a loan, and a formula lender will do that.
When applying to a development lender, you will need to be patient and ready to work with the person assessing your application. On the positive side, the process will help you to learn more about your business and often set you up for long term success.
With a development lender, you may end up paying higher interest rates, because they take on higher-risk loans.
Beware of the formula lender that gives you the money you ask for without assessing whether you have a viable business. The quick yes may turn into a long-term debt with no revenue to cover the loan repayment.
Women’s Enterprise Centre is a non-profit organization devoted to helping BC women launch, lead and scale their own businesses. Our full range of services includes business loans up to $150K, business advice, skills training, mentoring, resources and a supportive community to help women entrepreneurs realize their business potential. Connect with us today for personalized support for your business!