Loans are available, but the rules have changed, in some cases substantially. To assist you in preparing the documentation for your loan request, we offer the following tips:
- Do not expect quick responses. There is more analysis surrounding a loan request today.
- Absolute honesty and full disclosure are required for any loan request. If there are any negatives about the borrower, principals or property, they must be explained at the initial application.
- “Cash out” loans are virtually non-existent. Some working capital can be built in to SBA loans, but sale-leaseback and factoring financing are the primary sources for unencumbered cash today.
- Credit is critical. Sometimes damaged credit requests can be funded but rate and LTV will be negatively affected.
- Cash flow is an absolute necessity. Business unprofitability may be explained, but negative cash flow and negative business history and trends are deal killers. Three years’ history is required for analysis of the business if the business has been operating for that period.
- Small business (SBA) loans are popular and available, but the requirements are inflexible and may appear to be illogical.
- Business startups are virtually impossible to finance, even with industry experience. Expansions and acquisitions adding locations are not considered startups.
- Successful borrowers will have provable cash reserves (up to 6 months) for operating continuity.