How Your Company Narrative Can Improve Your Loan Terms

Obtaining Financing – Why Your Company Narrative Matters

Without an established personal relationship with a trustworthy lender, securing a working capital loan for day-to-day operations can be difficult for any CFO. Many finance executives spend weeks painstakingly creating a loan package for their lender, only to be offered an unfavorable term sheet or rejected altogether. This is frustrating, nerve-wracking, and a waste of time. It feels like a crapshoot to get funding. Many CFOs don’t realize that sometimes the reason the proposal is getting passed over is because it’s missing a key piece: your narrative.

According to Forbes Business Council, storytelling is one of the most effective ways to capture your audience. Stories activate empathy, foster motivation, and drive action – precisely the ingredients needed to win over lenders.

What is a Company Narrative for a Corporate Loan Request?

Your narrative is the showpiece of a lender’s credit memo. You want it to be robust, clear and to weave in qualitative details that match the numbers on your financial statements. An expertly crafted narrative provides a glimpse into your company that wouldn’t otherwise be seen during the scoring process and can tip the loan terms in your favor.

A corporate narrative brings together key strategic elements into a coherent and powerful story. Lenders evaluate loan requests all day. In order to capture their attention and give them confidence in your company, your loan package has to be compelling. As noted in The Power of Storytelling in Financial Services Branding, well-structured stories build trust and help financial organizations stand out in a crowded marketplace.

Human beings are wired for narrative, so stories are the single best vehicle we have to communicate our ideas to one another. Stories have an almost unparalleled ability to spur action, gain confidence, and change minds. If everything else in a loan application is average, a unique narrative can make your company unforgettable. And if there is anything that may raise a red flag, your narrative is your chance to give context. But to increase the chances of getting a favorable term sheet, you can’t just use any narrative structure – you must understand what kind of story you need to tell.

Highlight Your Strengths as a Mid-Market Business

Harnessing the benefits of storytelling in a loan request is completely dependent on using the right kind of narrative. A start-up, for example, will likely want to center their narrative around the perseverance and dedication of their CEO, who lenders will need to put their faith in. This is not the case for mid-market businesses, who need to showcase past success and a history of reliability, or if there were negative trends, what they did to correct them.

Research published on arXiv points out how credible narratives shape expectations and influence institutional investment decisions, an essential factor for mid-market businesses seeking a competitive edge.

Mid-market banks and lenders want information that will help them predict future success and probability of repayment. A successful narrative for a mid-market company is one that reassures lenders that a business is not a risky borrower. Some highlights to consider including in your narrative:

• History of the company: why and how it was started
• Longevity: how many years in business, and if you’ve weathered at least one recession
• Positioning: how you are well-positioned against the competition
• Challenges: how did you address challenges you encountered

By crafting a narrative that highlights the strengths of the company, your loan request is much more likely to be approved.

Tailor Your Request to Match the Type of Lender

Lenders will often try to invest their capital in a specific way to achieve certain goals. Some lenders focus only on specific verticals, like restaurants or retail stores. To be able to make a reasonable funding request that aligns with the lender’s goals, the first step is to make sure you’re engaging with the right lender. Oftentimes, one of the reasons a company’s loan request gets rejected is because the story their business tells does not align with the lender. That’s why carpet bombing a multitude of different lenders with the same package is usually ineffective. For example:

• Cash flow lenders look for established businesses with strong financials
• Asset-based lenders want to understand the assets that can be used a collateral: inventory, A/R, equipment

Understanding the lenders and tweaking the company’s story accordingly will increase your probability for closing your loan at favorable terms. A custom narrative changes the game from a crapshoot to a stacked deck.

Highlight Customer Relationships

But no matter who a CFO is planning on borrowing from, there are some aspects of the story that should stay constant. You always need to talk about the market your company has carved out and the customer base it has captured. Usually, the best way to frame a narrative for a mid-market company is to center the story around the need for the service the business provides. The most successful mid-market narratives include details about solid customer relationships and current deals. Some areas to highlight that will be looked upon favorably by the lender’s credit committee:

• Long-term binding contracts
• Relationships with prominent companies
• No concentration of more than 10% in any one customer

Taking the time to highlight the demand for a company’s service helps prove to lenders that the business is not at risk of having a dropoff of customers. This reliability makes lenders more confident in your ability to repay.

Show Perseverance through Hard Times

Besides just emphasizing the good aspects of a company, a skillful story can help to explain when the results weren’t as good. A smart CFO takes this opportunity to tell a comeback story. When things got hard, how did your company persevere? No matter how the business kept going, whether through cutbacks or new products, make it part of the narrative. Any company able to explain how they survived a hard time in the past will help gain the trust of lenders

As S&P Global highlighted, optimism about loan growth is on the rise among bankers despite broader economic uncertainty, so a compelling narrative can give your business a timely advantage in a growing market.

Your Company Narrative is a Game Changer for Loan Approval

The bottom line is that a strong narrative in a financing request changes the game. Taking the time to craft a narrative unique to your business is well worth it; it can justify why you qualify for a larger loan amount and a better rate. A loan request with a strong story has an edge, and will help you to not only stand out, but also to find the best possible term sheet waiting for you in your inbox Monday morning.

As technology advances, incorporating both structured data and compelling narrative text is becoming more powerful in lending. According to research on arXiv, narratives improve lender evaluations and default predictions, making your written story matter more than ever.

Frequently Asked Questions About Corporate Lending and Company Narratives

What are the best corporate lending options for mid-sized businesses?

Mid-sized businesses can benefit from considering a variety of options including traditional banks, non-bank lenders, credit unions, and platforms like Cerebro Capital. Many companies use Cerebro’s Commercial Lending Marketplace to compare term sheets and connect with lenders who specialize in loans tailored for mid-market organizations. Non-bank lenders are often recognized for quicker processes and flexible requirements, while SBA loans are attractive for their lower interest rates and government guarantees.

Which financial platforms offer reliable corporate lending solutions?

Platforms such as Cerebro Capital leverage advanced technology to streamline the corporate lending process and provide actionable insights. Corporate lending platforms can reduce funding times by up to 40% and offer tailored financial solutions for business needs. Leading fintech solutions  empower businesses with efficient access to debt capital and improved customer experiences.

What characteristics define the most effective corporate strategies for raising debt capital?

The most effective strategies involve a combination of a clear company narrative, robust financial documentation, and  matching with the right lender profiles. Organizational narrative, as discussed in this blog, is a game changer, presenting your business strengths and addressing any financial challenges enables better loan outcomes. Using tools like Cerebro Capital’s Debt Capacity Calculator also helps businesses understand their optimal borrowing levels.

 What pain points do businesses face when seeking corporate lending?

Common challenges include higher interest rates, inconsistent revenue streams, and lengthy approval processes. Working with a platform like Cerebro Capital gives companies access to a variety of lenders and financial products, making it easier to compare terms and mitigate some of these common pain points. Additionally, businesses must be prepared with proper documentation and a strong narrative to boost their chances of success.

Where can I find more resources on corporate lending practices and regulations?

Cerebro Capital’s blog offers regularly updated insights on lending practices, documentation requirements, regulatory updates, and best practices in the industry. For deeper industry lending topics, engaging with Capital Markets team, financial advisors and monitoring regulatory sites is also recommended.