The importance of employee count
Why do commercial lenders care about the number of employees in my small to medium-sized business (SMB)?
Because it helps them understanding businesses scale and operations.
Resource allocation: The number of employees in an SMB gives lenders insight into your resource allocation. More employees often indicate a larger scale of operations, which can influence the type of financing you need.
Business growth: Employee count can be a strong indicator of business growth and potential. A growing workforce might suggest expanding operations, which can be appealing to lenders.
Does having more employees improve my chances of obtaining commercial financing?
Balanced perspective: While a larger workforce can signal a thriving business, lenders also consider other factors. It's not just the number of employees, but how effectively they are utilized and the overall financial health of the business.
Efficiency matters: In some cases, a smaller but highly efficient team can be just as compelling to a lender, particularly if your SMB demonstrates strong profitability and a solid business plan.
What if my SMB is largely automated and relies on fewer employees?
Highlighting efficiency and innovation: In such cases, it's important to emphasize how automation and technology contribute to your business efficiency and profitability. Lenders appreciate innovation and effective use of technology.
Financial health is key: Regardless of employee count, the primary focus for lenders is the financial health of your business. Demonstrating strong revenue, good credit, and a clear plan for the use of funds is crucial.
Can the nature of my business affect how lenders view employee count?
Industry-specific norms: Yes, different industries have varying norms regarding employee counts. For example, a tech company might operate successfully with fewer employees than a manufacturing firm.
Tailoring the pitch: Understanding these industry norms and clearly communicating how your business aligns or innovates within these norms can help in your discussions with lenders.
Should I include plans for hiring more employees in my financing application?
Strategic planning: If you have concrete plans for expanding your team, include this in your application. It shows foresight and a plan for growth, which can be attractive to lenders.
Realistic projections: Ensure that any plans for hiring are backed by realistic financial projections and a clear understanding of how these new hires will contribute to your business growth