Next, if you’re conditionally approved for funding, your loan application will move along to the second part in the funding process: underwriting. During the underwriting phase, CAN Capital will dig into your application and learn more about you and your business. Underwriting gives a lender—like CAN Capital—a bit more time to take a closer look at the risk they’re about to take on by funding to your business. In most cases, underwriting only takes a couple days or less.
The whole process involves someone reviewing your financial documents, learning more about your company, and understanding how you plan to use the funding. Let’s take a look at how underwriting works at CAN Capital and what you can expect from this stage of your application.
When you get conditionally approved, expect to receive a phone number to call, along with a list of some financial information you’ll need to have ready to go.
This includes 3 months of business bank statements or credit card processing statements, plus the first page of last year’s tax return. Your conditional approval could also include a limited-time promotional offer, like 0% APR for the first 6 months on a 12- to 24-month loan. Any financing offers like these are based on information from your loan application—and they generally get extended to businesses that CAN Capital’s underwriters decided were the most financially stable, says Jason Rockman, VP of brand and partner marketing at CAN Capital.
What’s With The Phone Call?
When you call CAN Capital at the number they give in your pre-qualification letter, you’ll be connected to a funding specialist to complete the underwriting process. The specialist will set you up with an account and ask you to send over those financial documents over email or fax. While you’re on the phone, that CAN Capital financial representative will also ask you questions to learn more about your business and how you’ll use your loan proceeds.
This is also an opportunity for the financing specialist to discuss the different kinds of loan products CAN Capital offers, like traditional short-term loans or TrakLoans, introduced less than a year ago.
A TrakLoan is an alternative financing product for business owners who might not qualify for a loan because of poor cash flow or credit issues. A TrakLoan is a “loan” that borrows the most popular attributes of a merchant cash advance: it lets business owners make daily payments based on an agreed-upon percentage of their daily business credit and debit card sales. A TrakLoan is yet another type of loan option if you’re not eligible for a traditional loan or prefer a “cash flow friendly” product. Payments on a TrakLoan adjust every day based on your daily sales, and the process stops automatically when your loan gets repaid, according to CAN Capital.
Do I Ever Need to Provide More Documents?
In most cases, a funding specialist won’t need to see any further financial documents. Based on the documents you’ve already sent over and the information shared over the phone, the underwriters should have everything they need to come up with a loan package for you.
In fact, CAN Capital gets most of what it needs to process and approve your loan from your very first online loan application. Almost immediately upon submitting your application online, CAN Capital’s Daily Remittance Platform forecasts your risk based on the strength of your business. This data—along with your credit history, plus some intense algorithms based on the forecasted and historical success of companies in your industry—gives CAN Capital a realistic snapshot of how likely you are to successfully make your payments.
That said, lending money is still a personal business—and it’s in your best interest to be prepared to discuss your company’s goals, as well as send in any additional documents.
For example, if you apply for a loan in March and run a seasonal business that’s busier in the summer—like a landscaping company or an ice cream truck—your last 3 months of bank statements might not be the best reflection of your business. In this situation, a lender could ask you to provide banking information stretching back to your busy period during the previous summer, explains Rockman.
Are There Any Red Flags I Should Watch Out For?
First and foremost, CAN Capital looks at the performance of your business. But each applicant is unique—so you might need to give more financial details if you’ve had issues with low daily balances or high fluctuations, a history of insufficient funds, or a recent bankruptcy, says Rockman.
Insufficient funds, for example, will often cause a financial specialist to push the pause button on your application, and you could be denied funding altogether. At the very least, if your bank statements are littered with overdraft fees, you can expect to be asked for more information—an underwriter will want to look more closely at the health of your business.
Here are some other situations that could slow down your funding process:
- Using different names. If your legal entity name is different than the name of your company or your DBA (Doing Business As) name, this will throw up a red flag. If you have different names on your application, bank statements, and tax returns, an underwriter will need to spend more time verifying that your business name and legal entity are connected.
- Underestimating gross annual sales. If you do this, and the figure you provided isn’t backed up by your bank statements or tax return, that funding specialist will need to do more research in order to figure out your actual sales figures.
Here’s the good news: barring unusual circumstances, once you’ve called a funding specialist and provided all of the necessary financial information, you can expect to receive a loan offer letter explaining your funding package or options within 2 or 3 business days.
“More than 50% of our loans are processed and out the door the same day or the next day,” says Rockman.
We’ll discuss what a CAN Capital financing offer looks like in the final story of our three-part series. Don’t miss it!
from Fundera Ledger https://www.fundera.com/blog/2016/04/14/underwriting-process-can-capital/