Lending Readiness: Facts About Financing
Before applying for funding, begin compiling tax returns, financials, personal and business. If you haven't filed the previous year, be sure to have your extension request handy. If you don't have a CPA to prepare financials, contact us and we can help get you organized.
Are You Credit Worthy
Pull your credit report. If there is more than one owner, pull for each of you. Go to creditkarma.com a free service where you can obtain your report and score. Although lenders use Experian's score to qualify you, pulling from creditkarma.com will provide reports from Equifax and Transunion. This will give you an idea of where your credit score is, and what lenders will see on the report. Keep in mind, Experian is usually a few points higher than Equifax and Transunion. If you have any derogatory marks, be sure to prepare a letter of explanation detailing what you're going to do to resolve the issue.
How Will You Repay the Loan?
If you've been in business more than two years, lenders don't require a full business plan. A one to three page executive summary or marketing plan will be sufficient. Include how you plan to grow the business with the funding, such as create a job, fulfill large orders, improve store, etc. Also include how much you need and how you plan to repay the loan.
Be as realistic as possible with projections, both growth and financials. You will need to provide three years financial projections to demonstrate how you will increase revenues to sustain the business. Lenders are very keen about specific industries, so do your homework.
- Q. How long is the funding process? A. It can take up to 90 days, depending on the amount and type of loan you're applying for.
- Q. Do you guarantee funding? A. No. We cannot guarantee the outcome of deal.
- Q. How many lenders can you apply to? A. We do recommend being reasonable with submissions. Too many can hurt chances of getting an approval.
- Q. What do lenders look for in a qualified borrower A. It depends on the lender, not all banks have the same requirements. The basics are cash flow performance, ability to repay loan, sufficient credit score, capital for down payment.
- Q. Can I make a purchase during the process? A. In the interest of getting approved, we recommend borrower's restrain from making any substantial purchases and applying for credit cards.
- Q. How many loans do you close in a year? A. On average 15, which is double the rate of a single loan officer.
- Q. What;s the average credit score a lender want to see? A. 680 or better.
- Q. If there are multiple owners, do each them have to on the loan? A. Only if they own more than 20%.
- Q. Do all lenders require collateral? A. No. It depends on the lender and amount applying for.
- Q. Do I need a business plan for financing? A. Most lenders do require a business plan.
Technical Assistance FAQ's
- Q. If I'm a sole proprietor why would I need business modeling? A. If you have a desire to grow, a BM will help you be more effective in your efforts to reach customers and capitalize on opportunities.
- Q. Do you offer one-on-one consulting to startups? A. Yes. We love capturing an entrepreneur's vision in the early stages.
- Q. Why is it important to have a three-year financial plan if I'm a sole proprietor? A. It's especially important for a sole proprietor to have a financial plan, this helps stimulate sales and profitability.