We have all sat across from a prospect who says, “I want a lending partner who understands my business.” That statement is never one-size-fits-all. But in my experience, it often signals that something has changed in the business and the existing financing structure may no longer be as well aligned with the company’s current needs, operating realities, or direction.
The Right Structure Starts with the Client
When I assess a structure, I start with the client. Financing affects liquidity, management’s time, operating flexibility, and the ability to respond to change. Before discussing a solution, we need to understand the client’s goals, pressures, day-to-day realities, and what management needs the financing to accomplish.
That takes more than lending expertise—it requires empathy, careful listening, and candid guidance grounded in the pressures management is navigating. We have to learn the business—its cycles, priorities, risks, and direction—then bring market perspective and credit experience to the conversation. Together, those insights support practical guidance and a flexible, durable capital structure that gives management room to operate as conditions change.
Financing Should Work Beyond a Strong Year
Every business faces changing conditions. Industry headwinds, rising costs, shifting demand, customer disruption, or an ownership transition can test liquidity. Thoughtful structuring accounts for those possibilities rather than assuming today’s performance will continue.
The key questions come before closing. When will the financing work well? How will it respond if performance softens? What flexibility will management retain? In ABL, availability moves with the business, so shifts in receivables, inventory, collateral values, or operating cycles can quickly affect liquidity. Clear parameters protect liquidity, reduce surprises, and balance client and lender needs.
A company’s performance does not always tell the full liquidity story. Changes in receivables, inventory, customer concentration, dilution, and seasonal working-capital needs can strengthen or constrain borrowing availability at different points in the business cycle. Building those variables into the structure at the onset preserves flexibility and gives management and the lender more options when conditions change.
When the Structure No Longer Fits
Owners and CFOs usually know when a financing structure no longer fits. Recurring exceptions, slow approvals, repeated explanations, unexpected availability changes, and administrative demands consumes time and reduce predictability. For a turnaround team, that friction can also narrow the window available to stabilize the business.
A facility designed for one set of conditions may leave too little room as the business evolves. More process is not the answer. The better response is to identify what has shifted, where pressure is emerging, and whether the existing facility, a restructured ABL solution, or a different capital mix best supports the next phase.
Guidance Should Create Clarity, Not Complexity
Rate and availability are only part of the decision. Reporting demands, reserves, advance rates, eligibility criteria, covenants, collateral requirements, decision speed, and flexibility can materially affect the financing’s value. Considering those factors together helps the lender and client evaluate how the financing will work in practice, not simply which solution appears to fit.
Before proposing terms, ask one straightforward question: What is the client trying to achieve?
Then evaluate each option against those priorities and explain the tradeoffs plainly. The answer may be to resize or restructure the facility, add flexibility, strengthen monitoring, or consider a different mix of capital. Good guidance puts the right client outcome ahead of any particular product or structure.
Experience Turns Insight into Useful Options
In my experience, financing has to work in practice, not only on paper. It also means distinguishing a temporary disruption from a structural concern—and recognizing pressure early enough to respond constructively.
Clients should see that experience in timely decisions, direct answers, and options that make sense for their business. Sometimes the answer is yes. Sometimes it is no or a different structure altogether. What matters is giving the client a clear path forward based on the realities of the business.
What Clients Should Expect from a Lending Partner
A strong lending partner connects collateral, cash generation, operating cycles, and future plans. For the client, which means more dependable liquidity, fewer avoidable exceptions, clearer expectations, and financing that supports both day-to-day operations and strategic change. Delivering that experience starts with three questions every lending team should ask before finalizing the structure.
Three Questions Every Lending Team Should Ask
- Do we understand the situation? — Listen before solving: Give management and its advisers room to explain the business, priorities, pressures, collateral dynamics, and desired outcome before discussing structure.
- Have we created clear options? — Guide with empathy and experience: Explain alternatives, tradeoffs, constraints, and likely liquidity implications plainly.
- Will the structure withstand change? — Build resilience up front: Test availability and flexibility across business conditions, then identify pressure points, information needs, and response options.
The Takeaway
The right lending relationship offers more than capital. It provides realistic expectations, access to decision-makers, and financing built around the business. Clients should see how their priorities shaped the structure.
The right guidance may not end in a deal. But it should leave the client confident that the advice was straightforward, the structure was sound, and the team will stay engaged when conditions get difficult. Keeping the clients’ needs at the center helps build resilience—and earns lasting trust.
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Joe Virzi is Executive Director, Asset Based Lending at First Merchants Corporation.
Email: jvirzi@firstmerchants.com
Website: ABL Finance Solutions | First Merchants Bank