Lead Up Tips
10
ORE R F E B TIPS ING FO Y APPLUSINESS B CING N A FIN
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Compare Lenders & Requirements Understand that every lender is different. Just because one lender may be willing to finance your business or property, you may get more attention or better terms with another one. Pay close attention to things like loan amount, interest rate, fees or collateral requirements, as they vary per lender.
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Have Your Financial History Ready Financial statements are like the financial dashboard of your business. Be prepared to provide your balance sheet, income statement, account information, bank statements and tax returns as part of the process. Most commercial lenders will require this information to consider your loan, although some put more emphasis on this than others.
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Know Your Business & Personal Credit Your first step should be to check your credit. Your credit history will play a significant role in what type of loan you qualify for and is especially crucial to a lender in certain circumstances. In commercial financing, you do not need perfect credit, but you need to be aware of any concerns.
Use Technology to Your Advantage Prequalify your business or investment property financing amount by using software available to you online—for example, leveragecalc.com. By prequalifying your financing request against common commercial lending guidelines, you can get an estimate of how much you can finance before speaking to a lender.
Prepare an Executive Summary Lenders will want to see you have a clear vision for your business, a realistic view of the goals you can achieve in the future and a plan to repay them. You can do this in a brief summary document.
Gather Your Legal Documents Many lenders may ask for your business licenses, articles of incorporation, commercial leases, franchise agreements, and so on, as a formality of the loan process. Ensure you are organized and ready to provide these if needed.
Understand Your Numbers You must demonstrate you know how your business works and can repay the lender. For example, knowing how your business cash flows monthly is an advantage when exploring any financing for your business.
Determine How Much Debt Your Business Can Afford Lenders will review your financials and calculate your debt service or interest coverage ratio, also known as your DSCR. If you calculate your DSCR before applying, you can make a very compelling case as to why you need the amount you are requesting and why you can be trusted to pay it back.
Invest Some of Your Own Money If lenders see you are willing to put up some of your own money in your business or property, they will know you are serious about moving forward. Personal collateral also decreases a lender’s risk in a transaction and can increase your odds of being approved.
Speak the Same Language as the Lender When applying for any business loan, the lender is going to ask you an array of questions. Financial literacy is an advantage when seeking commercial financing. Be prepared to answer lender questions quickly and clearly. Providing incorrect information can hinder your approval.
Source: Stormi Scott is the Business Development Manager at Leverage, a finance software dedicated to helping business owners and property investors make smarter and more informed lender financing decisions. For a demo of the software, contact Stormi at stormi.scott@leveragecalc.com.
30 Lead Up for Women
July-August 2020
