Prepare Loan Requests Like the Pros to Access More

The best approach  to take advantage  of the available funds if you are requesting a significant increase in credit is to prepare a complete loan package, prior to meeting with a lender and  submitting your credit request.  Consult with your financial advisors and take control of the credit process by understanding what is required prior to meeting with a lender.  This pro-active strategy helps to clarify real cash needs and makes your loan request stronger.  You look smarter while helping the lender to make a decision faster.  At some point in the process, most, if not all, of what is listed below will be required by the underwriting team for review anyway.  Make it easy for the lender to say yes to your request.  If you are working with a lender who already has your historical information in file, I recommend you provide a full package anyway.  Many times officers or underwriters are new and may not have your full historical file, thus delaying the process.

Below, find  the magical list of what you want to include in your package that most all underwriters live by in the review and approval of your credit. 

General Business Information

1. Business credit application:  Generally the lender(s) will have a credit application they require you complete.  Contact the lender(s and ask to faxed to you.

2. Business tax returns:  Provide 2006, 2005, 2004 and all schedules. 

3. Business financial statements:  A. 2007 year-to-date interim business financial statements to include balance sheet and income statement dated within 90 days of application; and   B.  Fiscal year end business financial statements for 2006, 2005, 2004 prepared by a Certified Public Accountant. The quality of the accountant, the firm and their credentials will be taken into consideration.

4. Current accounts receivable and accounts payable aging reports and current inventory valuation with same date as the 2007 year-to-date interim financial statements in item 3 above.  

5. If purchasing equipment, provide equipment bids with invoices or purchase orders for equipment or detailed equipment list.

For start-up businesses, business acquisitions or investment real estate acquisitions

1. If a business acquisition or investment real estate acquisition, provide 1 thru 4 in General Business Information above. 

2. Opening day business financial statement with two years business financial projections.

3. Complete business plan to conform to your  two year business financial projections.

4. Purchase Agreement with addendums (for commercial mortgage or business acquisition.)

5. If a business acquisition, provide a business valuation to justify the loan request .

6. Resume (biographical sketch) of key people who will be operating the company.

7. Construction projects:  A. Detailed plans and specs for construction projects and breakdown of construction /renovation costs; and B. Construction contract with general contractor identified.

8.  Site description and location demographics that can be secured from your commercial property manager or real estate agent.   Include past EPA reports, appraisals, tax bills and title reports, if available.  Preparing EPA, appraisal and title reports are faster, thus less expensive to  update with historical data.

9.  Rent roll for investment real estate or if you plan to rent a portion of your owner-occupied building.

10.  Copy of current lease or a copy of proposed lease if you are planning to move to a new leased location.  A letter from the landlord outlining the proposed term is acceptable for approval.

Additional credit structuring enhancement options

1.  Lending institutions have rigid criteria on how much  risk  they are willing to take on a credit request. In other words, how much money they will lend you, depending on their various credit formulas and criteria.   If your request falls short, to help mitigate the risk to the lender, structured financing can come into play to enhance the risk  to get the package you desire approved.  These programs could include the SBA, USDA, NIH and SBIR grants, ODOD, venture capital and seed capital.  There are many others, but these are the most popular.  Take the lead and recommend a review of these enhanced programs to the lender.   If this fails, seek other lenders who have different credit writing criteria and willing to work with you  to structure a package that best fits your business model.

2. UFOC and Franchise Agreement or Letter of Intent from Franchisor if involved with a franchised business structure.

3. Gifting certification if you are using gift funds towards any projects listed in this article.

Company  structure documentation for all loan requests

1.  For a Corporate Governance:  Articles of Incorporation, Bylaws of the Corporation, Statement of Continued Existence are required. If for a non-profit provide the Nonprofit Articles of Incorporation, Articles of Organization (if LLC.)

2. For a Partnership: Written Partnership Agreement, Partnership Certificate, Partnership Certificate from County Recorder's Office

General Personal Information

All owners who hold 20% or more of the business or who is a guarantor will need to provide the following information:

1. Credit Reports- pull your personal credit reports from the three major credit reporting companies before you request financing! These reports do matter, especially for companies with sales $25,000,000 and under. To be sure, the underwriters use this information and will weigh in heavily on the fate of your request. Considering over 40% of all credit reports have inaccurate information, you must take control of your credit reports. If there are inaccuracies that  affect getting the credit request approved, correct them.  This process can take up  to six months to a year to clean up.   Meanwhile, provide a written detailed explanation of errors and omissions, and an explanation of derogatory items that are valid.  Include the reports and your written comments in your  loan package. To find out what is being reported about you and your company, visit the  internet and pull up the three consumer reporting companies - TransUnion, Experian and Equifax and the primary business credit reporting company Dunn& Bradstreet.  Total cost for all four reports should be under $100.00

2. Personal tax returns - Provide 2006, 2005, 2004 and all schedules of all owners with 20% or more ownership of company.

3. Year-to-date personal financial statement. The lender may have their own form that should be used for underwriter review.

By understanding what lenders are looking for, you have more control in the sometimes tedious credit process thus better control of your business financing. If you don't like what you hear from the first lender there are many other lenders, with different credit criteria, to access their capital for your loan. 

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About the author:  Ms. Powers, President &  CEO of Powers Financial Group Inc, serves the north east Ohio area,  a former commercial lender and a small business advocate. The firm specializes in accessing capital markets, locally and nationally, to help companies secure financing for business loans, mergers and acquisition, restructuring debt and also provides consulting services to these  growing companies.    www.powersfinancial-group.com

                                                             Powers Financial Group Inc.   ©2007