Building strong relationships with experienced startup business lenders
The last thing a startup founder needs is a bad relationship with a lender.
Sure, most businesses start out with the idea of getting some funding. Capital is always on the mind of an entrepreneur. It’s what takes that great idea and gets it to grow into something bigger.
But here’s the issue…
For too many founders, lenders are a last resort to just get funding.
Run in, ask for money, and run back out. Simple as that.
Except…
It doesn’t work that way.
The real key to successful funding for startups is developing strong relationships with the right lenders. Not one-time, transactional relationships. Long-term partnerships.
That means building mutual trust, open communication, and a shared vision for future success. And that starts even before you need a loan.
What you’ll learn:
- Why Relationship-Based Lending Beats Transactional Financing
- The Smart Way To Identify Top-Tier Lenders
- Proven Strategies For Building Lender Trust
- How To Position Your Startup For Long-Term Success
Why relationship-based lending beats transactional financing
According to the Small Business Lending Insights Report from AltLine, 82% of small business applicants experienced partial loan approval from a small bank, while only 68% of small business loan applicants experienced partial loan approval from a large bank.
The reason for this is due to how these different institutions approach the lending process.
Relationship-driven banks take time to get to know you, your industry, and your business. They’re looking beyond credit scores to see “soft” indicators of your potential.
And this matters because:
Soft information can include qualitative aspects of your business, such as your industry experience, management capabilities, and personal reputation. An experienced business lender for startups understands that a startup’s success is not solely determined by its current financial performance, but also by its growth potential, market opportunities, and the founder’s vision and commitment.
The smart way to identify top-tier lenders
The fact is, not all lenders are created equal.
Sure, all lenders are looking for similar risk factors. Credit history, revenue, etc.
The difference is in how they approach the process. Some are all about speed, closing as many deals as possible in as little time as possible.
Others, however, focus on building long-term partnerships. And it’s the second group you want.
Here’s how to spot them.
Industry Experience
The best lenders have a wealth of experience in a specific industry or niche. Find the ones who are experienced in your space.
They should understand your market, growth rates, competitive landscape, and specific business model challenges.
The best lenders for startups will ask specific questions around your customer acquisition costs, lifetime value, revenue projections, and scaling challenges.
Speed Without Sacrifice
Efficiency is important, but not at the cost of a personalized experience. Experienced business lenders with startup track records offer efficiency, without cutting corners. That means they have efficient internal processes to get things done quickly.
But they also have experienced underwriters that work with you, to make sure you hit every box.
Track Record With Startups
A good lender always talks about how much they love startups.
The best lenders prove it.
Look at their portfolio. Check references from other startup founders in their network. Find the ones with a history of working with startups, and get in touch with them.
Statistically speaking, startups have a higher chance of finding an experienced lender.
This is because:
76% of banks and credit unions said they can process an application for a small business loan of less than $100,000 within five business days.
70% of banks and credit unions said they use non-traditional factors other than credit scores, such as customer reviews and business revenue growth when making lending decisions. This is crucial for startups, which may have limited credit history but high growth potential.
66% of banks and credit unions have lent to startup businesses.
52% of banks and credit unions offer non-traditional underwriting methods like non-traditional underwriting for startups without regular, recurring revenue, compared to traditional methods that require proof of income.
82% of banks and credit unions reported that they either offered or expected to offer at least some alternative funding to startups in the next five years.
Proven strategies for building lender trust
Building strong relationships with lenders is not rocket science.
But there are smart strategies for making sure it’s done right.
Here’s how:
Start The Relationship Before You Need Money
This is the biggest mistake startup founders make.
They wait until they’re at a cash crunch to contact lenders. At this point, they’re begging for a loan, trying to make their company look as good as possible to get funding.
The smart approach is to start building relationships up to 12 months before you need funding. Start by meeting with lenders.
Send them updates, quarterly newsletters. Treat them as advisors, not just cash registers.
Provide Transparent Communication
Trust and transparency go both ways.
Experienced lenders know that startups are unpredictable, sometimes for factors completely out of their control.
But what they won’t put up with is being kept in the dark.
Inform them if you’re missing milestones. If you’re overperforming, let them know that too. Send them performance metrics, and strategic updates.
Open communication builds trust, and that’s the key.
97% of borrowers said “customer service” was a “high importance” factor in deciding which lenders to partner with.
Demonstrate Business Acumen
If you’re asking someone to trust you with their money, you better be able to talk the talk.
Show them that you understand the numbers.
Have well-articulated financial projections. Share unit economics. Competitive advantages, and market positioning.
Lenders aren’t stupid, they want to give money to founders who get it.
Build Multiple Relationships
Don’t put all your eggs in one basket.
Build relationships with multiple lenders in your industry, 3-5 at a minimum.
Create some tension. Have options.
More importantly, lenders are specialized.
The lender you choose for seed funding might not be the right fit for Series A.
How to position your startup for long-term success
Winning lender relationships aren’t just about the first loan.
They’re about a long-term partnership that benefits both parties.
Here’s how to make sure that’s the case:
Think Beyond The Money
Money is great, but successful lenders have other things to offer.
Industry connections, advice, introductions to potential customers. All that, and more.
Position yourself to receive this support, by building mutual trust, and emphasizing shared value.
Maintain Regular Communication
Communication doesn’t stop once you’ve been funded.
Send monthly updates to your lenders.
Share key metrics. Challenges you face. Wins you’ve had. Ask for their advice on key strategic decisions.
By maintaining open communication, you can build trust and position yourself as a credible and reliable borrower.
Exceed Expectations
Fastest way to build lender confidence?
Beat your projections consistently.
If you say you’re going to do $50K in monthly revenue, hit $60K.
If you come to them with an ask next time, your credibility will go far beyond just your business plan.
Plan For The Future
Experienced lenders plan for the long-term. They think about where they want their portfolios to be in 12, 24, 36 months.
Let them know what your future capital needs will be. Paint them a picture of your future.
This allows them to plan accordingly, and perhaps hold capital specifically for your future rounds.
Help your startup to thrive
Winning with experienced startup lenders is a game-changer.
It’s the difference between your startup thriving, or just barely surviving.
By developing strong, long-term relationships with the right lenders, you position yourself for long-term success.
And the good news is, there is data to back this up. Not just general wisdom.
Lenders that are relationship-focused provide better approval rates, faster processing, and more flexibility than traditional, transactional lenders.
So, if you want to be a startup founder that’s in it for the long haul, build your relationships early. Start as soon as you get your business off the ground.
Focus on transparency, communication, and long-term shared value.
Position your startup for long-term success, and the right lender relationships will follow.
