Stay up-to-date on the latest firm, tax, and regulatory updates by joining our newsletter!
Commercial loans, particularly small business loans, have been in the news over the past year or so. The federal government’s 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 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.
4 basic questions
At the most basic level, a lender has four questions in mind:
Pose these questions to yourself and your leadership team. Be sure you’re crystal clear on the answers. You’ll need to explain your business objectives in detail and provide a history of previous lender financing as well as other capital contributions.
Lenders will also look at your company’s track record with creditors. This includes business credit reports and your company’s credit score.
Consider the three C’s
Lenders want to minimize risk. So, while you’re role-playing as one, consider the three C’s of your company:
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’s at stake with the loan. You may need to put personal assets on the line as well.
Gain some insight
Applying for a business loan can be a stressful and even frustrating experience. By taking on the lender’s mindset, you’ll be better prepared for the process. What’s more, you could gain insights into how to better develop strategic initiatives. Contact our firm for help.
Please SUBSCRIBE to our newsletter and you’ll receive practical, actionable updates on a regular basis.