Although there may be no simple answer to this question but here are 3 things to focus on to increase your chances.
- Have consistent information – Many businesses will ask for a financing approval and supply one business name on the loan application, a different will appear on their bank statements and then yet another company name on their tax returns, financial statements or business license. When you speak with a lender about borrowing money make sure you have your ducks in a row. Most likely, all of those businesses are the same so get with your CPA or attorney to streamline your operation. It may be as simple as updating your information with the state or changing the name on your existing bank account.
- Know what your applying for – A company representative or owner should be able to provide a complete, well thought-out justification for their equipment loan or working capital loan request. Among other things, most every loan officer must put together a “transaction summary” to their credit officer for review. So as a business owner, come to the table with a compelling argument that clearly and logically illustrates how you’ll pay back the loan and what steps you’ve taken to reduce the lender’s risk. Banks prefer to have an excellent collateral position (low loan to value ratio), a short loan term, or timely payment history on past comparable loan amounts. They like it even more when a potential borrower recognizes these things and takes the time and care to explain it to them.
- Address any negatives upfront – Chances are that if you’re talented enough to balance the many things it takes to run a business, you have the ability to identify potential credit snags. If you’ve missed a small payment in the past (business or personal), bounced a business check or paid a net 30 term supplier slowly, address them with your loan representative quickly and provide a good reason so he or she is aware of it and can down play it when presenting to the credit committee for approval. If you’ve had a major restructuring or serious default, ask the loan representative about the chances for approval or what you can do to become approvable again so you don’t waste your valuable time or the lender’s.
Keep these points in mind so you can present a clear picture of your company and secure more business loan approvals and equipment financing approvals.