How Lenders Make Their Lending Decisions

We are committed to having everyone share in the American dream. So, as our gift to you, we want you to know how lenders make their lending decisions. Whether you get your loan from us or from another lender, we want to do our best to help you succeed. So use the following (partial) inside lenders guidelines to help you get the funds you deserve. Character: Lenders review your character based on your personal credit report, D & B report, and the personal history that you provide. If you have low debt and have paid your bills on time for the last 10 years, your chances for a loan are good. But, what if your personal and/or business credit is not good? Anticipate the question, and give the lender your reasons for any credit problems (in writing), along with any proof you may have. Also, consider getting a cosigner with good credit. Collateral: Collateral helps lenders feel secure about getting their money back. But, what if you don’t have any collateral? You may want to consider taking on a partner/shareholder with collateral in real estate, securities, equipment, or businesses assets. You can also talk to family and friends for help. Ability to make monthly payments: Lenders want to be sure that you can pay your monthly loan payments and existing expenses and have a payment cushion of at least 15% or more of your monthly loan payment. Lenders look at past, present, and future business performance to see if you can make your payments. If your past history shows you could not make your payment today, show why you can make the payment now—for example: new rental income, new contracts, reductions of expenses. Also, be creative. A cosigner’s business may be strong enough to show the lender that the cosigner can make the monthly payment. Renting a portion of your business space to a tenant can increase your ability to pay your debt. A recent applicant who could not make their monthly payments rented out a portion of their property (30%) to a major public company for almost their entire monthly loan payment and is assigning the lease to us as collateral. Commitment: Show lenders your commitment. Borrowers often come to lenders while leaving themselves room to retreat if the business fails. Why would a lender risk its funds on someone who is less committed than the lender? Show your commitment, and offer your collateral up front. For example: Hernando Cortez (1500s Spanish explorer), upon arrival in Mexico, gave his first order (after landing) to burn his ships. This showed his commitment to conquering Mexico. We don't recommend burning your house, but lenders are interested in interested and committed people. Experience: Lenders want to know that you can run your business successfully. Give us your résumé and stress your qualifications. But, what if you don’t have all the necessary qualifications? Create your management team. Lenders don’t expect you to be able to do everything, but we do expect you to manage the business by hiring the right staff, consultants and advisors. Obviously, advisors with reputable Credentials enhance your image with lenders.  Employees may take less in salary in return for a percentage of the business. If they own a piece of the company, lenders feel they would remain in the business for the long run. Capital: Lenders want to know how much money you have invested in your business. Generally, they will lend a multiple of what you invest. For example, some lenders will lend 3, 4, 5, or more times what you invest. If you don’t have the money you need, look to friends, family, and investors. Like you, we want your dreams to become reality by helping you succeed. If we can help, call us.

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