Selecting a bank is one of the most important decisions a small or midsize business must make. Your choice can significantly impact your financial strategy, cash flow, ability to fund expansion and ultimately your long-term success.

Consultative banks get to know their clients in a way that transactional banks simply cannot. Truly consultative banks are designed to be an integral part of a business’s financial team. They also offer financing options that may not be available from other types of banks.

A consultative banking relationship proves particularly valuable when a creative financing solution, such as a valuation-based or U.S. Small Business Administration (SBA) loan instead of a traditional loan, may be in the best interest of a business. Only with an understanding of the nuances of a business and knowledge of a wide array of financial products can a banking advisor recommend and assist with nontraditional financing products.

Nékter Juice Bar, based in Costa Mesa, California, has leveraged its consultative banking relationship as it has continued to build its brand and expand its reach since opening its doors in 2010. Nékter makes fresh juices, smoothies and açaí bowls that are made to order.

Nékter is nearing a total of 200 franchise stores and 32 corporate locations across 22 states, as of early January. In addition, Nékter signed over 70 new franchise locations in 2022, scheduled to open over the next few years.

Particularly after the onset of the pandemic in 2020, many people became more health conscious. Nékter provides a solution for these individuals, and the ability to secure financing swiftly has allowed Chief Executive Steve Schulze to reach this audience and work towards its mission to make a healthy lifestyle affordable and accessible.

As the company has grown, a term loan and line of credit based on the value of the company as a whole, rather than existing collateral, have supported corporate growth, while also allowing Nékter to identify and purchase additional facilities. In some instances, we have also helped facilitate acquisitions. A close banking relationship opens up different growth opportunities that would not have otherwise been considered or quickly accessible.

At Enterprise, it’s about understanding the cash flow for this type of business — namely, not your traditional manufacturer and distributor. A franchise-heavy business model like Nékter’s shouldn’t be compared to traditional C&I [commercial and industrial] business. Instead, we adopt a forward-looking approach. We take the time to understand how each store performs and consider the timing from opening to when it will generate cash flow.

Now, Nékter is focused on attracting new franchisees while also supporting existing ones. Many Nékter franchise owners have between five and 15 locations. Giving these team members — who share Shulze’s passion for bringing fresh, unprocessed juices, smoothies, and more to their community — the tools and resources to grow their business is an important piece of his vision.

Having worked with the Nékter team since the company comprised few locations in 2013, helping facilitate its growth and seeing the company grow are why we’re dedicated to guide our clients to financial success.

Similar to Néktar’s position, collateral-light loans are a better fit for many franchise-heavy businesses. This type of loan can be based on the value of the company as a whole, allowing you to continue your plans to grow while securing funding inclusive of your business model.

Here are additional nontraditional options that might be a good fit for the unique circumstances of your business.

Sponsor Financing

A common alternative to equity financing, Sponsor Financing is a type of leveraged financing used to monetize the perceived value of an organization or other intangibles. Frequently used to finance business recapitalization and expansion, Sponsor Finance loans are also often used for acquiring closely-held businesses where the owner is looking to exit the business or realize partial liquidity for retirement.

Sponsor Finance loans serve to support business growth and increase returns to investors by financing business operations that generate incremental profits.

Asset-Based Lending

The opposite of Sponsor Financing, asset-based loans use accounts receivable and inventory as collateral and are often set up as a revolving line of credit. Funds from asset-based loans are frequently used for working capital, debt refinancing, acquisitions or simply an infusion of cash to get over a financial hurdle.

These loans are well-suited for manufacturers, distributors and service companies that have seasonal revenues or tight cash flows, or are growing rapidly. Asset-based loans are also often utilized by new businesses that don’t have the track record to qualify for a more traditional loan. This form of financing can help stabilize operations by providing improved liquidity, financial stability and predictable cash flow.

New Markets Tax Credit Program Loans

The New Markets Tax Credit (NMTC) Program is a federal lending program available for companies pursuing projects that are located in certain low-income communities. The goal of the program is to stimulate business and real estate investments that result in jobs and other benefits to people living in these neighborhoods.

NMTC loans can provide a source of low-cost, long-term financing or refinancing for a company’s working capital, equipment, real estate or other projects located in areas designated by the U.S. government. To qualify for a NMTC loan, the project or business must be in a Qualified Census Tract.

NMTC loans have many advantages, including below-market interest rates, lower origination fees, longer period of interest-only payments, higher loan-to-value ratios and often longer payback periods. Enterprise Bank & Trust is one of the few lenders that has deep expertise in helping companies navigate and close both federal and state NMTC loans.

Small Business Administration Loans

The SBA offers a number of loan programs for business expansion or operations. SBA loans have many benefits including favorable interest rates, flexible terms and lower down payment and collateral requirements than traditional commercial loans. Enterprise can consult with you on which of the following SBA programs might be a fit for your business financing needs.

  • SBA 7(a) Loans SBA’s basic loan program providing funds for business acquisitions, partner buyouts, real estate and working capital.
  • SBA 504 Loans Fully collateralized loans for real estate or equipment for use by companies that don’t qualify for traditional financing.
  • Express Program Offers loans up to $350,000 including term loans and lines of credit; often used to refinance debt, obtain working capital or buy real estate.
  • Export Express Program SBA’s simplest export loan product offering streamlined financing up to $500,000.
  • CAPLines Program Offers loans up to $5 million to help businesses meet cyclical and short-term working capital needs.

While SBA loan products are the same, all lenders are not. Enterprise has Preferred Lender status with the SBA, meaning your SBA loan decision times are likely to be substantially reduced.

Other Creative Financing Options

Enterprise can assist with other innovative financing solutions. Included in these are loan funds which are short-term notes with terms that can be tailored to meet the unique needs of a business. Loan funds are often available with rates that are a fraction of what the market would charge.

Another option is SWAP financing. SWAPs are highly customizable and are commonly third-party interest rate contracts that provide a longer-term fixed rate than most lending institutions typically offer.

Franchise businesses often have financing needs that don’t fit neatly into traditional loan products. Fortunately, there are many creative and nontraditional financing options of which business owners may take advantage.

Growing franchise businesses need practical financial solutions and expert guidance, not just basic banking services. Having access to solutions tailored to your needs and a dedicated advocate within the bank could be the difference between failure and long-term success.

Kamil Wozowicz serves as a Senior Vice President, Commercial Banking for Enterprise Bank & Trust in Los Angeles. He has nearly 20 years of experience in commercial banking, serving the local business community.