|
 Print Friendly
 Email to Friend
|
|
How To Get A Small-Business Loan
|
|
Article 2: What Lenders Don’t Want
Certain actions can kill your loan approval chances. Heed these six red flags.
1. You may want to tout your product or service. But even if what you sell is a real stinker, you still can get a loan – if you can demonstrate your ability to repay the loan.
The quality of your goods and services is secondary to your financial condition. The niftiest product won’t attract a dime if odds are slim that the lender will get repaid.
2. A definite red flag is a history of slow payments or worse, loan defaults. Lenders judge reliability by what you’ve previously done. Few take chances on borrowers with bad financial management histories.
3. A bankruptcy is bad. But five years after a bankruptcy, if the borrower “didn’t stiff the bank and has had good credit since, we generally can do the loan,” says Fullerton Community Bank Senior Vice President Joan Earhart.
4. “Another deal killer,” says Nancy Russell, Comerica Bank vice president, “is if (the borrower) has no résumé of experience for the business they want to operate.”
A prospective owner of an automotive repair shop who knows nothing about repairing automobiles isn’t likely to win the trust – or money – of a reputable lender.
5. Lenders don’t want to hear that a borrower intends to put none of his own money into the business venture. If borrowers aren’t willing to put their own money at risk, it’s unlikely lenders will put theirs at risk either.
“If they don’t want to use their own money, that’s one of the biggest (negative) things,” Russell says. “I always say upfront we look for them to have an owner’s injection of … their own money into the project.”
6. Finally, a distinct red flag goes up when an applicant says, “We’re not showing very much profits because we didn’t want to pay taxes so we wrote it all off,” Earhart explains.
Unrealistic write-offs inflated to avoid taxes make it difficult for lenders to judge whether cash flow is adequate to cover loan payments.
|
|
|
|
|
|
|
|
|
|
|
