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He begins to squirm.
Him: "Well..., about
money thing, I wouldn't be coming to you if I had any of my own. And, as far as my credit is concerned, it's happens to be pretty good...I think."
You: "Do you have any assets that can be pledged against this loan in case of a default?"
Him: "Default?! Good grief, man. Can't you tell by looking at me that I'm a man of my word?!"
You: No.
At this point, he leaves your presence discouraged, fuming, or both. No one in his right mind would fund such a proposal at face value. On other hand, if that same man came to you (and you were in business of lending money), laid out a sensible business idea, put up 20% of loan amount in cash, had good credit, had experience either at running a business or in industry he was proposing, and had a sufficient amount of collateral to cover losses due to unforeseen circumstances, you might consider him a "good risk", wouldn't you?
All lenders have difficult task of making future decisions based on historical information. Commercial or private lenders such as commercial finance companies, leasing companies and mortgage banks, though not directly regulated by government, still must adhere to certain credit granting criteria. Institutional lenders such as banks, credit unions, savings and loans, etc., lend money obtained by borrowing from their depositors. Thus, they are both regulated by government and more critical in their policies regarding lending. Regardless of whether you approach one or other, neither one of them are in business to lose money. Give them reasons to lend to you. Did you know that lenders want to provide money to you? Let them!
By preparing your personal three C's properly for scrutiny they will endure, you'll give funder a good opportunity to fulfill your request for business startup capital. There are many other details involved in process, such as sizeable amount of paperwork you need to prepare and gather. But, if you're serious and confident about your venture, pony up and be willing to hurdle necessary fences to satisfy lender's requirements. At that point, an independent loan broker will be one of your most valuable allies. Contact a professional who can walk with you through process and explain details of transaction. Your chances for approval will become greater and your lender will thank you.
In part 2 of this article, we will examine types of paperwork necessary to package a startup loan request to lender.
Mark Uptain is the owner of Regent Business Capital, a loan and lease brokerage that works with lenders nationwide to help small and medium-sized businesses get financing. His website www.EquipmentLeasingSource.com, offers free equipment leasing information and competitive quotes to businesses throughout the United States.
