AmiSight 10/29: Sometimes the Lending Market Is Telling You to Slow Down
I had a call today with an entrepreneur who is pursuing a growth-by-acquisition strategy in the logistics business. They closed on their first acquisition just two months ago, using an SBA loan that took up almost all of their available SBA borrowing capacity.
Now they're ready for deal number two. And they want to move quickly.
They called to ask me what their borrowing options might be. My answer was that finding a lender willing to finance another acquisition this soon would be like finding a needle in a haystack.
And I think the lenders are right.
Two months is hardly enough time to know how the first acquisition is going. Are the customers staying? Is the cash flow holding up? Are things working out the way they expected?
I understand the excitement. When you're trying to build a business through acquisitions, it's tempting to keep going, especially when another opportunity comes along.
But I also think there's a lesson here. Sometimes when the lending market is telling you to slow down, it's worth listening.
Lenders don't always get it right. And I'm certainly not suggesting that entrepreneurs should let banks dictate their growth strategies. But there are times when their reluctance to lend is telling you something important about the risks you're taking.
My advice to this entrepreneur was pretty simple. Give the first acquisition some time to settle in. Prove that it works. There will be other opportunities.
Sometimes slowing down is the best thing you can do for your business.
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