Borrowers Are Showing More Scrutiny in Choosing a Capital Advisor
The business is more sophisticated now than ever, and borrowers are taking a closer look at how capital advisors can get the deal done.
Borrowers are beginning to show a higher level of scrutiny in choosing a capital advisor. The business was once more about industry relationships, but today, borrowers are looking at key factors to make sure that the deal is meeting their needs and accomplishing their business plan.
“It’s extremely important,” Malcolm Davies, principal and managing director of The Davies Group at George Smith Partners, tells GlobeSt.com. “The business is much more sophisticated than even a decade ago. My favorite expression is ‘It’s not just who you know, it’s how you know how to get them to do your deal.’ Obvious factors include the advisor’s connections, their comparable experience and their competency level.”
The right advisor will connect well with the client and have time for them, but also understand the investment vision and can be persuasive in the capital markets to accomplish the borrower’s goals. “Consider the structure of the advisor’s firm,” says Davies. “Are the individuals working your deal recognized for their work and compensated fairly? Will the firm’s profits go to the people on the front lines? To shareholders? To pay off company loans? The answers to these questions may influence how motivated the advisor is to hustle for you. “
This isn’t to say that the personal connection isn’t important. In fact, it is one of the crucial elements, according to Davies. “It’s critical that you have a bond or connection with whomever you hire,” he says. “Relationships are everything in our business. After competency and connectivity, the next and most important factor is passion. Do they have the passion to see your vision through?”
Ultimately, industry relationships are essential to getting the deal through. Davies recommends asking how effective the capital advisor is in getting people to focus on the deal. “For example, our team uses a ‘deal champion’ strategy,” he says. “Deal champions refer to our connections at lender and capital provider companies who ‘vouch’ for our deals. These champions will back our clients’ projects when presenting to their Investment committees. Our team acts as these champions’ outsourced analyst team to provide them with as much information as possible to generate interest, create confidence and build consensus within the larger capital organization.”
The importance of vetting your capital advisor will have a significant impact on your bottom line. “Putting the wrong person on the job could cost you and your deal in time, which amounts to money, getting locked into a financial structure that doesn’t serve your best interests or any number of outcomes that hamper your goals rather than support them,” says Davies.