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What do lenders look for from a prospective borrower?

By Jim Antonilli
Filed under: Fund Raising         Words in this Post: 165



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Going out to get that Loan, get a Bank’s prospective first!

AREAS OF GENERAL INTEREST TO LENDERS

A financial institution’s lending policies fall into three general areas: assessment of a borrower’s personal and business history, employing a risk reduction program, and consideration of potential disqualifying factors.

Lenders investigate the following criteria:

· Personal credit record of the borrower.
· Financial history of the business.
· Growth of the business.
· Profitability of the business.
· Physical condition of the facilities and equipment.
· Experience of the key managers.

To reduce risk, lenders require SOME of the following:

· An equity pledge by the owner to the lender.
· A personal-assets pledge by the owner to the lender.
· The cosigning on the loan by all principals or guarantors.
· A lien on all assets and personal property of the owner(s).

These are factors that MIGHT cause a loan application to be turned down:

· Prior business bankruptcy
· A bad debt record.
· Low company earnings.
· Low value of secured collateral.
· Management inexperience.
· Unfavorable liquidity, debt, and profitability ratios.
· A criminal record.

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Author: Jim Antonilli

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