Lenders are extremely busy and are often put off by loan requests riddled with errors and/ or do not meet the basic standards of lending.
But small business borrowers with little knowledge of packaging loan requests can enhance their chances of getting funded through use of experienced loan packagers.
This is what Loan packagers do:
• Examine borrowing causes and clearly determine the borrowing need, thus eliminating vagueness and superfluous needs. Lenders are horrified by borrowers who request for loan amounts “out of the blues” based on nothing other than collateral value.
• Gather all the necessary documentation. Most borrowers are not aware of the loan documentation they need to provide to lenders. They spend weeks sending bits and pieces of information to lenders, thus agitating lenders and prolonging approval times.
• Analyze financial statements to ensure that the trends are right and all ratios make lending sense. If for example you revenues are declining, you must drill deep into the causes and mitigate them intelligently. Failure may lead to loan denial.
• Review Business and Finance Plans. Lenders have little or no time reviewing business and/ or financial plans that don’t make sense.
• Benchmark borrower business with industry peers. This helps in giving a lender the insights of the borrower’s industry and how the borrower is performing compared to the industry. If the borrower’s performance is not up to speed, then the borrower may want to undertake a business diagnosis test to identify the causes of poor performance.
• Match borrowing need with banks’ lending criteria. Banks have different lending policies based on loan amount, sector, purpose, collateral, years in business etc. Borrowers spend endless days shopping for lenders only to be denied having had several of their credit reports pulled.
• Provide insights on questions to expect from lenders. Fussy or lazy lenders will deny a loan on a flimsy excuse, such as, ‘the borrower does not maintain a budget’ or ‘the borrower is unaware of his average inventory carry’ etc.
• Advise on loan structure and terms including interest rates. Loan structure is key to getting favorable loan terms. 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 their loans faster
• Get very competitive rates
• Get to know their business finances better
• Reduce cost of loan-shopping
• Save on the opportunity cost of delayed or denied loans
• Minimize the number of credit reports that banks pull
The cost of loan packaging varies widely depending on the type of services provided and the complexity of the loan package.