Bank lending has really been tight in recent years. Most entrepreneurs now believe that the only word their banker can say is "no".
The reason: The latest financial crisis has changed the lending system. Banks and other lenders will not only give you a corporate loan because you have a good smile or a new idea. You have to get in there, roll up your sleeves and really lure them to lend to your business - make them approve of you!
Knowing that when lenders begin to approve more loans, the flow of new corporate loan applications will really flood. To ensure that your loan application is funded, you need to find ways to get your business labeled - do not just stand out but stand the rest.
Here are some tips for getting your business loan application moved to the top of the pile:
Choose the right bank or lender: Not all lenders will emerge from this economic mess in the same position as they entered. Some have changed their entire lending philosophy. Some will no longer lend to small or medium-sized companies - focusing on only high-level / low-risk companies. Some will only provide loans based on companies in certain industries or with special collateral. And some may be gone from the business lending arena altogether. So start with your current bank or previous lender and see if or what they have changed with regard to their business loan policy.
Furthermore, all banks and lenders have changed their loan approval criteria. This was not done to prevent companies from seeking loans but more from the threat of new government regulations. Thus, if your company could get a corporate loan or working capital credit before the financial meltdown - it does not mean it will qualify for one today or even tomorrow with the same bank or lender.
Security and Guarantees: The banks are now more focused on repayment and not just a form of repayment but several. Banks and other lenders always look at the current positive cash flow as the first source of repayment. But it is no longer enough. What happens if you have a slow month or if the economy thinks again? Lenders will start seeking additional forms of refund from sources such as personal guarantees or large amounts of and / or highly valued collateral.
Security will be the key to this new lending market. If you are serious about your company's prospects, you should not have any trouble placing collateral against a business loan request. Not only does your lender provide an additional repayment source, but can really show your banker or lending officer that your business is serious - which essentially helps you close the deal.
Keep in mind that different collateral has different value. Banks and other lenders do not look at how much you paid for an equipment or property. They look at their value as quickly as they can sell it at fire sales prices in order to recover their losses.
The best security - where your business would get the best value for a loan - is high-risk collateral - such as accounts receivable, investments, purchase orders or even personal liquid assets at the company's owner or management team.
Make sure your business loan application clearly states what security and / or guarantee you or your business is willing to provide as well as its current, conservative market value. If you leave this information forward it will show to your lender that you are here to not fight with them over this hotly questioned question, but are willing to play within their rules. Plus, banking as simple offers and dealing with lots of collateral is usually the easiest to be approved.
Remember, if you do not show and show that you are serious about your business and that you have not taken the time to understand your lender's security or warranty policy, your bank or lender will treat you the same way and move your application to a lower box or the round file in the corner.
A clear story: Make sure your loan application tells your story. Not only what your business does, but why it does what it does, who (your customer segment) it's goal and meets, how its current management can build value in the future (based on what it has done before) and what funds will be used too specific. Entering your company loan application as you will use these funds for general business purposes will not fly anymore. Banks and other lenders want to be repaid and must be satisfied that you and your company will distribute these new claims (loan funds) in such a way as to generate enough new revenue to repay the loan and interest as well as grow your business.