The Lender’s Asked for What?

There is no doubt that the way in which Banks assess potential applicants has changed. In fact we believe that it is still a ‘moving target’. We have attempted to outline a number of issues that are being raised by lenders at present and try to put some reason and thinking behind their requests.

Strengths, Weaknesses, Opportunities, Threats – SWOT

Lenders are looking to see that you have a firm grasp on not only what your business is doing, but what your opposition are doing, what areas are available for you to grow your business and what are the areas that could hamper that growth or even see your business lose ground.

Can you Repay the Loan?
Lenders are looking to see consistent reporting of turnover and profitability over at least the 2 previous years. In reviewing this, they are also looking at your debtors listing, are you collecting the money that is owed to you in ‘good time’ or do you have a number of large amounts owed that are over 60/90 days or worse. This impacts on your ability to meet loan repayments as and when they fall due each month.

What Security/Comfort can the Lender Grab?

Security offered for any loan is a tricky area. historically lenders had been prepared to look at past performance and time in business when assessing what ‘comfort’ they would require.

Lenders comfort can take a number of roads; it could be that a cash deposit and/or GST rebate would provide sufficient security for a bank to advance the loan.It may be that the lender will require ALL associated persons and/or Companies and Trusts to provide guarantees in order to provide the lender with additional comfort and security.

If the total debt at any one lender is under say, $1.0 million – then they will be more likely to consider requests to waive a person/spouse from the loan or consider removing a non-earning company from the guarantees required.

Once exposure passes the $1.0 million mark, the lender will look to capture all parties to the borrower and have them provide guarantees. Our experience shows that the majority of lenders will require the guarantee of a spouse if the property is in joint names or their name solely, even if they are not a shareholder/director of the business.

What can I do to Assist the Application?
Many businesses we deal with fail in having their finance approved because they take a ‘need to know’ approach and do not provide us with all relevant information upfront. If we are going to provide your business with the best opportunity to secure the right loan for you – first time, we need to be provided with the full picture.

The lenders do their own research and have avenues available to them to check the history of both business and owners. These include other lenders, credit checks and work and trade references.

If you do not fully disclose information upfront, you will get caught out and the lender will think, “What else have I not been told about his client”.

By ensuring that your accounting software is kept up to date so that you are in a position to provide ‘management accounts’ showing year to date performance for your company at a moment’s notice will also assist and support your application, especially at this time of year when lenders are looking at June 09 financials which are some 9+ months out of date.

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