The concept of Product Fit is an important consideration made by lenders who are dealing with a request to issue a company new facilities. It is also central to the value proposition of Independence Debt Advisory; as we strive to maximise customer outcomes.
In order for Product Fit to exist the following needs to be true:
- The requirement is Debt Risk not Equity Risk (link to article)
- The requirement is sufficient to fully fund the activity i.e a company may wish to build a new head office and is paying for the build in stages - agreeing facilities for just stage 1 of 3 would obviously be inadequate to fully fund the requirement
- The term of the payback matches the product term i.e a company financing a site move may see that payback over a 10-15-20 year period, so repayment within 3 years would be inefficient for cash and likely exceed the returns generated
- The cost of the facilities are offset by a clear benefit to the business i.e short-term-high-cost-credit at 40% interest maybe a very expensive way to settle wages/payroll costs, which are better served by long-term working capital facilities and understanding why their is a shortfall in the first instance?
- The implications of the Product used are such that there is no impediment to the future trading/requirements of the business and in particular the business is not in fact growing a future requirement for debt which it cannot fairly expect to service
The funding landscape ranges from global institutions (with highly prescriptive policies and procedures) all the way down to individual and micro-lenders (who operate entrepreneurially and with unstructured decisioning and process). Each will take their own view on the extent to which Product Fit is important for them.
At Independence Debt Advisory, providing high quality customer outcomes is of paramount concern. Where possible we strive to share our expertise to ensure that:
- Outcome 1: Customers can be confident they are dealing with firms where the fair treatment of customers is central to the corporate culture
- Outcome 2: Products and services marketed and sold are designed to meet the needs of identified customer groups and are targeted accordingly
- Outcome 3: Customers are provided with clear information and are kept appropriately informed before, during and after the point of sale
- Outcome 4: Where customers receive advice, the advice is suitable and takes account of their circumstances
- Outcome 5: Customers are provided with products that perform as firms have led them to expect, and the associated service is of an acceptable standard and as they have been led to expect
- Outcome 6: Customers do not face unreasonable post-sale barriers imposed by firms to change product, switch provider, submit a claim or make a complaint