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Commercial loans, particularly small business loans, have been in the news over the past year or so. The federal government\u2019s Paycheck Protection Program has been helpful to many companies, though fraught with administrative challenges.<\/p>\n
As your business pushes forward, you may find yourself in need of cash in the months ahead. If so, more traditional commercial loan options are still out there. Before you apply, however, think like a lender to be as prepared as possible and know for sure that the loan is a good idea.<\/p>\n
4 basic questions<\/strong><\/p>\n At the most basic level, a lender has four questions in mind:<\/p>\n Pose these questions to yourself and your leadership team. Be sure you\u2019re crystal clear on the answers. You\u2019ll need to explain your business objectives in detail and provide a history of previous lender financing as well as other capital contributions.<\/p>\n Lenders will also look at your company\u2019s track record with creditors. This includes business credit reports and your company\u2019s credit score.<\/p>\n Consider the three C\u2019s<\/strong><\/p>\n Lenders want to minimize risk. So, while you\u2019re role-playing as one, consider the three C\u2019s of your company:<\/p>\n 1. Character.<\/strong> The strength of the management team \u2014 its skills, reputation, training and experience \u2014 is a key indicator of whether a business loan will be repaid. Strive to work through natural biases that can arise when reviewing your own performance. What areas of your business could be viewed as weaknesses, and how can you assure a lender that you\u2019re improving them?<\/p>\n 2. Capacity.<\/strong> Lenders want to know how you\u2019ll use the loan proceeds to increase cash flow enough to make payments by the maturity date. Work up reasonable cash flow and profitability projections that demonstrate the feasibility of your strategic objectives. Convince yourself before you try to convince the\u00a0bank!<\/p>\n 3. Collateral.<\/strong> These are the assets pledged if you don\u2019t generate enough incremental cash flow to repay the loan. Collateral is a lender\u2019s backup plan in case your financial projections fall short. Examples include real estate, savings, stock, inventory and equipment.<\/p>\n As part of your effort to think like a lender, use your financial statements to create a thorough inventory of assets that could end up as collateral. Doing so will help you clearly see what\u2019s at stake with the loan. You may need to put personal assets on the line as well.<\/p>\n Gain some insight<\/strong><\/p>\n Applying for a business loan can be a stressful and even frustrating experience. By taking on the lender\u2019s mindset, you\u2019ll be better prepared for the process. What\u2019s more, you could gain insights into how to better develop strategic initiatives. Contact our firm for help.<\/p>\n \u00a9 2021<\/em><\/p>\n <\/body> Commercial loans, particularly small business loans, have been in the news over the past year or so. The federal government\u2019s Paycheck Protection Program has been helpful to many companies, though fraught with administrative challenges. As your business pushes forward, you may find yourself in need of cash in the months ahead. If so, more traditional […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7,14,10],"tags":[8,11,12],"class_list":["post-15670","post","type-post","status-publish","format-standard","hentry","category-articles","category-business","category-news","tag-articles","tag-news","tag-updates"],"_links":{"self":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15670","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/comments?post=15670"}],"version-history":[{"count":0,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/posts\/15670\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/media?parent=15670"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/categories?post=15670"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sfw.cpa\/news-and-guides\/wp-json\/wp\/v2\/tags?post=15670"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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