Frequently Asked Questions
When reviewing a loan request, the lender is primarily concerned with repayment. The following questions constitute some of the most commonly asked questions:
- Character - How do loan officers evaluate it?
Lenders will order a copy of the applicant's credit report in order to look into debt repayment trends. They want to know simply if you pay your bills on time.
- Cash Flow - Why do lenders look at cash flow?
Lenders will look at historical and projected cash flow statements to determine whether you will be able to repay the loan and still have money to adequately run the business. Incluce written justification for your projections in your loan proposal.
- Collateral - Is it needed?
Collaretal is an asset (something you own) which a lender may claim to satisfy a loan in the event the loan is not repaid according to the required terms. Often the assets purchased with the loan may serve as collateral. If the business does not have enough collateral, the bank will look to personal assets.
- Capitalization - What is it? How much is needed?
Capitalization refers to the basic resources of the company including owner's equity, retained earnings, and fixed assets. You do not have to be fully capitalized to qualify for a loan.
- Conditions - How will this affect application?
Factors that affect the success of the company yet are external to the business will also be considered by the lender. Examples inlcude government regulation, competition, and industry trends.
Chris
Woodard
1505 E. 17th Street, Suite 106
Santa Ana, CA 92705
Tel. 714-543-3759 - Cell 714-293-7400 - Fax. 714-543-3794
e-mail: chriswoodard@earthlink.net
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