Lenders are extremely busy and are often turned off by loan applications riddled with errors and/or that don’t meet basic lending standards.
But small business borrowers with little knowledge of packaged loan applications can improve their chances of obtaining financing by using experienced loan packagers.
This is what loan packagers do:
• Examine the causes of indebtedness and clearly determine the need for indebtedness, thus eliminating vagueness and superfluous needs. Lenders are horrified by borrowers who request “unexpected” loan amounts based solely on the value of the collateral.
• Gather all the necessary documentation. Most borrowers are unaware of the loan documentation they are required to provide to lenders. They spend weeks sending snippets of information to lenders, thus agitating lenders and prolonging approval times.
• Analyze financial statements to make sure trends are correct and all ratios make sense for loans. If, for example, your income is declining, you need to dig deeper into the causes and mitigate them intelligently. Failure to comply can lead to denial of the loan.
• Review Business and Financial Plans. Lenders have little to no time to review business and/or financial plans that don’t make sense.
• Compare borrowers’ business with industry peers. This helps provide the lender with information about the borrower’s industry and how the borrower is performing compared to the industry. If the borrower’s performance is not up to date, the borrower may want to run a business diagnostic test to identify the causes of poor performance.
• Match the need for borrowing with the banks’ lending criteria. Banks have different lending policies depending on the loan amount, sector, purpose, collateral, years in business, etc. Borrowers spend endless days searching for lenders only to be denied having several of their credit reports pulled.
• Provide information on questions to expect from lenders. Picky or lazy lenders will deny a loan with a flimsy excuse, such as “borrower is not keeping a budget” or “borrower is not aware of their average inventory” etc.
• Advise on the structure and terms of the loan, including interest rates. The structure of the loan is key to obtaining favorable loan conditions. You need to understand when to apply for a line of credit, a seasonal line, a short-term loan, or a long-term loan. Various loans have different interest rates.
The support offered by Loan Packagers justifies the fees charged because borrowers,
• Close your loans faster
• Get very competitive rates
• Know better the finances of your business
• Reduce the cost of purchasing loans
• Save on the opportunity cost of delayed or denied loans
• Minimize the number of credit reports that banks pull
The cost of the loan package varies widely depending on the type of services provided and the complexity of the loan package.