Friday, December 2, 2016

3 Secrets to Faster Business Loan Approval

With 28 million small businesses in the United States and approximately 543,000 new ventures starting each month, there’s a big need for funding, to get these businesses off the ground. And, with such high demand, plenty of lenders are willing to help out.

If you are one of these small business owners looking for funding and you need capital fast, you’re going to want to focus on:

  1. Lenders that can move quickly
  2. Preparing as much as you can beforehand in order to help the process move quickly

In order to help you with #2, we interviewed multiple business loan underwriters from Headway Capital, a lender that can fund quickly, and found 3 great ways to expedite your loan application process:

1. It’s All in the Details

Be as thorough as you can during the application process. If you have any gaps in your information, you could hit two road bumps. First, the lender may put in the effort to fill in the information themselves, which takes time. Second, the lack of information can give the wrong impression and make the lender less likely to approve your loan. If you have all the details from the start, your attention to detail and preparedness will shine through.

A few of the primary items that the some underwriting teams (including Headway Capital’s) might ask include:

  • The last 3 months of business bank statements. Be sure to provide the statements for the main revenue/operating account for your business.
  • The previous 2 years of business tax returns. This allows a lender to quickly answer any questions regarding business revenue that may arise during the evaluation process.
  • Gross revenue figures from prior years.
  • A specific purpose or intended use for loan proceeds.
  • Detailed information on any other debts/loans against your business (including original balances, current principal balance, maturity date, and potentially purpose of funds).
  • Proof of ownership is occasionally required if the secretary of state lists an attorney or another name as the registered agent for the business applying.

2. Be Proactive

Offer all the relevant information up front. This step goes hand-in-hand with step one; don’t narrow the information you provide to just what is asked of you—cover your bases. Include your personal financial information, future growth plans, etc. These are things a lender might or might not ask for, but delivering it anyway shows you are confident in your background. This can help minimize time spent collecting and delivering the requested information and make the lender’s job even easier.

Underwriters go through a comprehensive evaluation of each business that applies for a line of credit. They make sure to follow the 5 Cs of Credit Analysis whenever reviewing an application among other criteria. These include character, capacity, capital, collateral, and conditions. It’s important to understand what each of the C’s mean and to be prepared to provide any necessary information related to each.

Character: Your business experience, credit history, online presence, and customer reviews are all evaluated in this step of the process. Underwriters want to get a sense of your trustworthiness and stability as a business owner.

Capacity: Does your annual gross revenue allow for a comfortable repayment of any draw you could make based upon your credit limit? The accuracy of your growth and projection figures relative to what revenue has been in the past is reviewed as well. Additionally if your business has experienced any decrease in year-over-year revenue, being prepared to explain the reasons behind the decline will speed up the processing of your application.

“Your financial situation is important, and we want to know how your business plans on achieving its revenue projections,” says Tony Ciecinski, an underwriter at Headway Capital.

Capital: Underwriters want to ensure that your business is healthy and that you are invested in the overall performance of your business. If there are an abnormally high amount of transfers into and out of the main business account, applicants should be prepared to explain what those other accounts are and/or their method for how/where revenue is deposited for their business.

“Getting an understanding of how strong an owner’s commitment is to their business’s success and growth,” says Ciecinski, is something that underwriting will focus on during the application process.

Collateral: Headway Capital doesn’t require collateral as part of their loan application process, even though some other lenders might. But with Headway, and many other lenders, a personal guarantee is required in order to secure the repayment of the loan.

Conditions: Your business will go through a thorough analysis of industry risks, the local market it operates in, and the intended use of funds. Seasonality is also factored in to assess the competitiveness of your business in the marketplace. If your business is seasonal in nature, it’s a good idea to provide 6 to 12 months of bank statements up front to account for any seasonality. Underwriters need these additional statements so they get a more accurate picture of monthly revenues.

3. Use Your Resources

There are many resources available to you as a small business owner. Check with your local small business bureau for any services they may provide, including loan support.

If you don’t have one in your area, contact the Small Business Administration to find a counselor. SBA counselors can help advise you and make sure you have the right paperwork the first time through. Since they are so familiar with the process, they’ll also be able to advise you on the strength of your application and areas of improvement. Additionally, the SBA provides a useful online course that outlines the loan process for interested business owners. Resources for women-owned businesses are provided on their site as well.

By now, you’ve probably noticed that the key to a quick business loan approval is in the preparation. Get advice from reliable sources and be confident in the information you provide. You have the ability to obtain the funds you need—put your best foot forward to get them fast.

The information in this article is provided for education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness, or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.


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