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Lenders will test you, so you had better test yourself first.

Credit Worthiness:

  1. Will you repay the loan? This is based on your credit score. Above a 640 probably, below a 640 probably not. Pull all three credit reports so that you know for sure.
  2. Can you run the business successfully? Do you have five (5) years experience? Is the business two (2) years old? Have your resume and proof of time in business ready.
  3. Are you paying back the loan or is a tenant/customer? Have your account receivable ready.
  4. Is the loan tied to an asset or unsecured? Have your assets list ready.
  5. Is your business plan done? What a myth! Lenders do want to see that you can create a realistic plan, but they won’t approve you just because you have one. Get yours ready.
  6. Debt service? Do your financials indicate that you can handle the payment? Up-to-date personal and business finacial statements are required.
  7. What have you risked? Have you used savings? Have you borrowed from friends and family? If you don’t believe and you haven’t risked, why would a lender?
  8. What collateral will secure the loan? Your home, your savings, your retirement? Have your complete itemized list ready.

Get These Documents Ready:

  1. Up-to-date Balance sheet and income statements.
  2. Copy of all corporate records and filings.
  3. Copies of all insurance coverage. Health, car and business.
  4. List of all business customers by monthly percentage.
  5. Aging account receivable and account payable.
  6. The type, age and condition of all equipment.
  7. Copies of all mortgages, leases or long term contracts.
  8. Personal financial statements of all owners.
  9. Personal credit scores of all owners from all 3 credit agencies.
  10. Business credit report from Dun & Bradstreet and Experian.
  11. Personal and business tax returns for the previous 3 years.
  12. Personal and business bank statements for the last 12 months.

Lender Types:

  1. Credit – mostly concerned with your credit history Personal FICO above a 640 or it’s NO! Business Paydex above a 75 or NO!
  2. Cash Flow – mostly consider your ability to repay. Two years in business with account prepared financials, filed tax returns, and a bank rating for positive proof.
  3. Coverage – Mostly want collateral worth more than the loan. Personal real estate to 100%, Commercial real estate to 80%, everything else maybe to 60%.
  4. Asset based – care only about the value of the asset such as account receivable, credit card receipts, warehouse receipts, liquidation value of inventory, equipment or real estate.
  5. Personal loans disguised as business loans. Could be business credit cards using your social security number, SBA loans based on your home equity, etc.

Your Collateral:

Unsecured business loans for businesses less than two (2) years old and for owners with FICO scores under 680 "DO NOT EXIST". Lenders require that you pledge of some or all of your assets.

Collateral is:
Real estate, accounts receivable, inventory, savings, structured settlements, private notes, life insurance policies, stocks and bonds, purchase orders, floor planning, furniture, equipment, endorser, co-maker, guarantor, etc.

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