by Matt Clegg, Director of Sales
If you are a small business or a large business and you need capital, financing ultimately will come down to accessibility and cost. How do you maximize capital at the best possible price? It all comes down to how you present yourself to the lender.
Even if your business is profitable, you have been around for more than two years, your personal credit is stellar and you are free from blanket liens from other lenders, it is all for naught if you present your information incorrectly.
First, be sure your financials are up to date. So many worthy loan requests come in to financial institutions and are declined for the sole reason that the business owner has let maintenance of their financials fall behind. As an example, if you are earning $1 million dollars per year in revenue, but your bank statements only show deposits of $800,000, you will not get approved. We see consistently that when our clients’ EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) is incorrect, which is often, we are not able to calculate your ability to cover the loan payments. Hence, you will not be financed.
Second, have your documents lined up and ready to submit. Most financial institutions require the following documents to underwrite you for financing:
- 2 years of business tax returns,
- 1 year of personal tax returns,
- current year interim financials,
- 90 days of business bank statements, and
- a personal credit application.
- *If you operate with billing terms, you will need to submit an A/R aging report.
By just missing one of the items above, your loan package is incomplete, and, more often than not, the lender will not underwrite your loan request.
Key Takeaway: Keeping your financials and essential documents accurate, up to date and accessible will keep affordable loans available to you when you need them.