What Lenders Look For From You

What Lenders Look For From You

The Six C’s of lending:

Credit- Ok FICO score (620+), no bankruptcies, no late mortgage payments, no liens, etc
Collateral- Real Estate equity, Machinery, Equipment (Hard Fixed Assets only)
Character- Is business owner experienced in viagra industry? Any management experience?
Cash Flow- Does client have ability to repay loan. Current P&L, Balance Sheet, Tax returns (w/profit, not loss) Startups need business plan& financial projections
Capacity- Does client have the ability to take on new loan payments & pay existing debt currently
Capital- How much has client invested in the business up to this point?   Startups need 10%-30% capital injection (skin in the game) No 100% financing available

 

Information about loan requests you should know

First of all you viagra be realistic. Look at your request from a lenders view. Lenders are in the business of making safe, sound, secure loans that they can profit from….period! Lenders are not in business to make your dreams come true. They do not participate in high risk propositions!

There are numerous criteria a lending institution utilizes in making a positive funding decision. Some of them include length of time in business, business profitability, business cash flow, business assets, personal collateral, industry type, owners experience in the industry and many more.

Remember all lending institutions have preferred industries and industries they perceive as high risk. If your business is in an industry they perceive as high risk, like real estate, you will have a difficult time obtaining financing. If it is a real estate purchase, the equity in the property and the profitability of the deal will be considered. But if there is Real Estate purchases involved, there are no 100% financing options anymore. You must have a down payment, “skin in the game”. If you are not willing to take even $1 dollars worth of risk, why would a lending source? The answer is they will not. Don’t ask.

The profitability in your business indicates the capacity to repay the loan or business line of credit you are seeking. Obviously your business must have the ability to repay back the entire loan amount approved (service the debt). Good revenue, cash flow and profitability are essential in getting a positive application decision. They do not look at what is “going to happen” once you get financed. Lenders look at your situation now and can you make the payments of the new loan request plus your current obligations.

The loan amount requested and the reason on a loan application must make sense to a lending institution. Asking for an amount higher than can clearly be paid back without difficulty is a red flag that a business is struggling. As a general rule, the most that can be expected from a traditional lending source is 20% of gross sales revenues. Never expect a loan amount equal to or larger than your gross annual sales, it just doesn’t happen! You cannot have Net Profits of $20,000 per year and ask for $250,000. You cannot possibly service that debt.

The reason for a loan is also very important. Lenders like to fund businesses looking to expand, acquire equipment, acquire property with equity, increase marketing or anything to do with growth! Lenders do not like to provide their capital to a business struggling and seeking debt consolidation, payroll assistance, tax help or legal financing.

To get a positive loan application decision your business must be properly prepared and you must be qualified! If you are not qualified for a loan, no one can help you! If your business does not have the capacity to pay back the loan itself, you will be looked at personally as the business owner. In fact they may look at you anyway to see if there are any tax liens, judgments or mortgage late payments. Don’t believe they won’t. Lending money is a risk.

If you have bad personal credit (sub 635 FICO score) in today’s lending environment, it is going to be very difficult to obtain financing. People with less than 550 FICO scores eliminate 90% of lending options, even from Alternative Finance companies. If you have bad personal credit, fix it now with the help of professionals then apply. And if you have bad personal credit and a non-cash flowing business, why would you be applying at this time with no ability to service the debt?

If we are approaching a “Private Investor” source, and you have bad personal credit, no collateral and a non-cash flowing business, you absolutely must have a professional business plan created. You cannot do this on your own. And that business plan better show an amazing return on investment for the investor in a short time frame. Remember, lenders are in the business of making safe, sound, secure loans that they can profit from….period!

Remember, you must be realistic!

The good news is: If you are qualified we can help you get funded.