The perspective of any lender is, 1) they desire to lend you money, and 2) they want to get it back when it’s all done. It’s that simple of a reality. Providing the documentation listed below, you’ll be answering the question in the shortest time possible — an asset for a lender. And one that, by itself, will help you get funded.
Depending on the loan type, most loans take anywhere from a month to three or four for evaluation. But ironically, much of this delay is on client side, with the lender waiting for requested documents. Following this list, and responding quickly to requests for information can cut your processing time by as much as half.
And while we’re on the subject, with the full set of documents, we will give you a quick yes/no, whether we can do your loan, often in as little as 24 hours. If we believe we have an outlet, we’ll issue the term sheet the next day, and then the evaluation process begins.
Although perhaps unnecessary, we feel it’s beneficial to tell you exactly why this is needed. This perspective from the lender side will give you a much better understanding — and partnership, in this process.
Lenders desire to provide financing for you. It’s actually unproductive for them to have undeployed cash. However, there is always one question they will ask themselves in any application: What is the chance I’m going to get this back? (Or perhaps more accurately, what is the chance I will not get this back?) This simply understanding, all by itself, will put you ahead of some of the other loan applications in the pile next to yours.
The various sub-categories below serve to give them a picture of your perspective loan and request: How long have you been in business? What level of experience? How “secure” is this application — both as to business proposal and individual? How forthcoming is borrower with information? Are both the proposal and the borrower solid? And it doesn’t have to be stellar. If not, take heart; one negative doesn’t necessarily kill a business loan. However, two or more often will.
Two Years Bank Statements
— If you are applying personally, you will need two years of personal bank statements. If you are applying as a business, you will need personal statements plus bank statements from your business.
Two Years Income Taxes
— Again, if you are applying personally, you will need only two years of personal income taxes. But, if for a business, you’ll need both personal and business taxes for two years. If you are close to the end of a tax year, provide the most recent, filed taxes. Often, you can supplement a loan application with a current-year tax copy as soon as it’s filed.
Business Proposal Summary
— This can take on many forms: It may be as simple as a few paragraphs on what you’re looking to accomplish — or can be a full-blown Executive Summary. But, more often than not, for a first look, simpler is better. Lenders want to scan the prospective deal quickly to see if they can do it. If it fits into one of their “boxes”, they can ask for more detail as it goes. And, on that count, understand that each lender has their own specialty: some like convenience stores, some like hotels, some like multi-family, etc. This is the value of our large number of lender relations: we match your loan request type to that lender who happens to like that type of loan. This very reality increases your chance of approval significantly, over a one-type-fits-all lending scenario (read, bank).
In any event, the proposal should include the following:
— What you are seeking, in terms of dollar amount.
— What length of time you anticipate.
— How you anticipate paying for the loan, both interest and principal (i.e., from where the resources will be expected to come? Operations? Asset resources?
— Exit strategy: How long do you anticipate a need for this loan; what are your plans to close it out?
— Experience in this field.
Supporting Statements (optional, but beneficial)
Pro-forma and Other Cash-flow Statements
A very beneficial document is the pro-forma income statement: Month by month, what will your use of cash be, and at what point do you expect this to turn around. It’s expected that the early stages of a loan will see more cash go out, than come in. As the proposal matures, the venture will begin to generate the ultimate supporting income. All of this is expected, but it’s good to know when this expected timeline will be. (Pro tip: Do not underestimate this time by providing unrealistic estimates. Conservative estimates are better. A borrower who doesn’t meet stated targets is considered a less mature borrower.
Market, or Competitive Analysis
This is also an optional statement, but lends to the view of a more sophisticated borrower, one who understands exactly what is expected from the proposal; one who additionally expects the unexpected, and has allowed provision for it.
While this is not necessary at the beginning, it’s helpful to know the personal credit history and score. While we or lender will pull this information in the course of evaluating a loan, the credit score and history is very helpful to know at the outset.
While the list is comprehensive, not all of this is necessary at the outset. I have listed these roughly in the order of priority. The top two and three items are very beneficial for us to have before we begin. Feel free to lean on our help in developing the necessary documents, such as Pro-formas or Competitive Analysis. It is our pleasure to be your partner in this process. Write us.
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Sarasota, FL 34277