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Consulting Company Loans: Financing For Business Consultants

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Loans For Consulting Companies

The business consulting industry has seen exponential growth after recovering from the Great Recession. During the recession, many businesses across all industries cut back on business consulting services due to lack of extra expendable income, but from 2011 to 2015, the worldwide business consulting market grew from $55.8 billion to $67.3 billion. This has led to experts predicting that the 2016 business consulting industry will generate over $71 billion. However, if a business consulting company wants to stay ahead of the game, focusing on key industry trends is essential – especially because there are over 250,000 consultants in United States consulting firms today.

What is a Business Consultant?

Business consulting has been around for years now, and many business owners across all industries are taking note of the invaluable benefits gained from hiring a business consultant. Simply put, a business consultant works with their client to put in place new business strategies, planning and problem solving tools, and any other client need in order to improve performance and efficiency within a client’s business. Often times, business consultants analyze the ins and outs of a business to create valuable solutions to help companies reach their ultimate goals. In today’s business consulting market, this definition leads to very broad and varying processes laid out by each individual consulting business – whether the business consultant works with specific niche markets, focuses on )information technology, collaborates on changes within a company, or deals with the unfavorable side of business through eliminating staff, there is a very diverse industry being created in business consulting.

The Hierarchy of Business Consulting

In the United States, major management and business consulting companies earn more than $2 billion each year for the various services they offer – but the business consultant industry is shifting and seeing disruptions that the business consulting industry has been lucky enough to avoid in the past few years. To stay on top and ahead of the competition, especially for small business consulting individuals and firms, focusing on the hierarchy of purposes for business consulting are vital to staying successful in this diverse and competitive market. As mentioned above, the business consulting industry has become incredibly diverse with endless amounts of business consultants popping up to offer a specific service, but the most successful business consultants are learning to integrate fundamental objectives into their business consulting services. According to the Harvard Business Review, the eight most important aspects of having a successful business consulting company are:

  • 1. Providing Information: This is the most common area that clients seek professional business consulting services for. As the title states, providing industry specific information to a client, analyzing the structure of a business, or anything else that a client requests relating to their business is important. Remembering that just because a client asks for a set of information does not mean it is all the information a client needs – learning to strategically discuss and evaluate all expressed and unexpressed needs of a client is vital.
  • 2. Solving Problems: The number of problems that can arise in any given company are endless, but knowing how to intuitively encourage the client to understand all the true problems can be difficult. Most of the time the client needs help in defining the real issues for their business.
  • 3. Making a Diagnosis: For business consultants, this is the bread and butter to all services – being able to accurately assess a situation and provide a valuable diagnosis. This objective tends to be the one that puts the most strain on the consultant-client relationship, because managers do not want to be in the wrong. The best business consultants have learned how to appropriately handle these situations.
  • 4. Making Recommendations: This step is often done through a written report or oral presentation in order to summarize the conclusions. All business consultants at this step must be able to make convincing recommendations that are correlated to the analysis; basically, a business consultant must make sure that their recommendations are logical and have supported reasoning.
  • 5. Implementing Recommended Solutions: As a business consultant, making a suggestion to change a client’s business in some way must be supported by how that change will be used, implemented, and the steps needed to make it happen. Clients want to utilize innovations and ideas that they can see actively working and growing their business, so making sure to help with these business solutions is vital.
  • 6. Building Commitment Around the Solutions: This step is very similar to number five, however this involves more intuitiveness and interpersonal skills – a great business consultant must know how to convince a client to take action. It sounds odd that a client would not act on the suggestions and analysis that they paid for, but many times there are multiple factors that influence the ultimate decision. Focusing on effectively communicating and encouraging a client can be difficult, but the business consultants that master this skill will see positive results. This step also allows a business consultant to create a strong client-consultant relationship, hopefully leading to repeat business.
  • 7. Facilitating Client Learning: This is another major step in facilitating a strong client-consultant relationship. Many successful business consultants work on effectively fixing the problem at hand, while teaching the client methods and strategies for future issues – don’t worry, this does not mean that you will lose business by teaching a client how to handle future challenges on their own. Instead, this will encourage great referrals to other business owners, which is one of the most effective marketing strategies for business consultants today.

Most of these objectives are typically asked by a client, however more often than not, business consultants focus solely on the simple task that is asked by the client. The first four objectives tend to be the most commonly requested services; however, clients often overlook the last few objectives, resulting in many clients not even asking (or knowing to ask) for these services. Not only does effective business consulting consist of implementing all of these stages, it also allows any business consultant to charge more for their services since they truly do offer the most bang for their buck! Going above and beyond client expectations by implementing all of these strategies to improve a client’s situation to help grow their business is key in competing in this incredibly diverse industry.

Reasons a Consulting Company May Need Financing

There are a variety of areas that a business consultant would consider obtaining a loan for, however these needs will vary depending on the size and niche focus of the business consulting company or individual. The number one area that all business consulting firms must be focusing on is technology and marketing. Technology has made becoming a business consultant much easier, but to stay ahead of the competition, business consultants must be implementing the top technological advances relating to the niche focus. Marketing is also encompassed in technology because social media, newsletters, and SEO are the top ways for business consultants to market their services and attract new customers. Other major reasons that a business consultant would need financing choices include day to day working capital expenses, expansion, new equipment, hiring new employees, and payroll needs. The possibilities are endless, so considering the variety of finance options are essential.

Types of Consulting Company Loans

Types Rates Terms Funding
Bank 6-10% 3-7 years 14-30 days
SBA 6-10% 3-7 years 10-30 days
Line of Credit 5-15% 1 – 3 years 7-30 days
Alternative 6-25% 1-5 years 5-7 days
 Cash Advance 1.16-1.55 3-24 months 1-3 days

Consulting Company Bank Loans

By no means is a bank loan easy for any business to obtain, especially a business consultant firm. But if you do qualify for conventional financing you’ll enjoy the very best rates and longest terms of all debt financing instruments. You’ll require substantial financial documentation and the process can be prolonged, but if you stick it out it will be well worth it.

  • Rates: 5-10%
  • Terms: 1-25 years

Consulting Company SBA Loans

SBA loans and grants are underutilized financing programs for consulting companies. The government often views these consultants as contractors and offer both financing and grants to help with the business contractors endeavors.

  • Rates: 6-8%
  • Terms: 7-25 years

Alternative Consultant And Contractor Loans

Alternative lending is the perfect financing tool for company’s that can’t obtain conventional bank loans, and/or don’t meet the SBA’s tough requirements. Alternative lenders are able to pre-approve a borrower almost instantaneously, and fund within a week (if not sooner). Documents required are minimal compared to banks, with borrowers only needing to provide a couple of years tax returns and financials.

  • Rates: 9-25%
  • Terms: 1-5 years

Consulting Company Cash Advance

Getting a loan for a consultant or independant contractor isn’t easy. Often times the contractor finds themselves locked-out of both traditional and alternative loan options altogether. When that happens the best option may be to obtain cash advance financing. A business cash advance is the sale of the consulting company’s future revenue in return for upfront funding (at a discount to the lender). The process is reletively quick (funding within days, if not the same day) and the credit requirements are minimal.

  • Factor Rates: 1.16-1.50%
  • Terms: 4 months – 2 years

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