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Prepare Your Business for the New Lending Market

Guest post by: Joseph Lizio

Article Overview: Banking and overall lending have changed. It has gone back to sound banking policies and requirements. Which means many businesses hurt by this economy will not qualify for any lending or business loans. But, it does not have to remain that way!

Prepare Your Business for the New Lending Market

Prior to the financial meltdown in 2008, business lending was pretty easy. Walk down to your bank - meet very minimal criteria (did not matter to the bank as they would sell off your loan and collect fees) and you could walk out with enough capital to run your business for several years. In fact, there were even low document or no document programs and even programs where you did not have to show any means what-so-ever of repaying the loan - simple. Not so simple today. Although banks would love to go back to those days (it was easy and cheap money for them via fees) it does not look like we will return to that type of lending market any time soon.

First, banks and bankers are now under intense scrutiny from their own customers and other shareholders. No one who has a stake - either an investment or deposit relationship - wants their bank or financial institution to fail.

Second, the federal government (supposedly) has stepped up their overview of these institutions and with their current push for socialization, most bank's management are fearful that one wrong step could lead to a quick and absolute government takeover.

Regardless of the reasons (justified or not) - the bottom line is those days of easy credit are gone.

Interestingly, SBA loans (government guaranteed loans - currently up to 90% of the loan amount with reduced borrower fees) have been making a come back - inline with the liquidity of some banks. That is good news for small business owners. However, the new rules (created out of the Recovery Act of 2009) are about to expire - but should be reinstated for another 6 or 7 months - again more good news for business owners.

But, what still remains is the fact that this economy has hurt most small and medium businesses - hurt them to the point that they still will not qualify for any bank financing - not in this current lending market. Credit scores (business and personal) are in the toilet. Income is down while expenses are up meaning that positive cash flow to service debt is nearly nonexistent. Both items that were over looked in years past but matter once again.

However, it is still not too late. Prior to the meltdown, banks would either ignore or modify their policies to fit the borrower. You have good credit but no income - we will put you in this program that does not require income verification. Have good income but bad credit - we will just simply ignore your credit (they sold the loans off anyways).

With this new lending market - these scenarios just will not happen any more. Banks have reverted back to their solid lending policies and will now follow them to the letter. But, that does not mean that you, the business owner, cannot work NOW to improve your situation before applying for that need loan.

My suggestion: Call around to banks and other financial lenders. Ask them about their policies or guidelines or their minimums regarding credit, cash flow and collateral. Then, evaluate your situation - determine where you are lacking and work now to fix it.

Example, if your credit (and all financial lenders will pull your personal credit) is bad - find ways to improve it. Look into consolidation. Bring past due accounts current. Pay down some of that outstanding debt. Work with the three major bureaus to remove information or items that may not belong to you.

If your cash flow is limited, work to improve. If you cannot find cheap (low cost) ways to improve revenue then work the other side and reduce costs. A dollar decrease in over all costs is just a valuable as a dollar increase in revenue.

There must be hundreds of ways to improve yourself and your business - you just have to be willing to put in the time and make the hard choices - now. If you can't show that you are committed to the growth and prosperity of your business today, then why would a bank believe that you will be later - when they expect repayment?

The idea is to do it now when you are not in the market for capital instead of waiting until you actually need a loan and finding out you don't qualify.

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Article Tags: banks, business, capital, credit, lending, loan



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How to get financed - We looked at doing the same thing. Problem is you own the truck out-rite, so most require a add on to your title or release of title to them for liability should you default. Contact Kevin at RV Lending, he assisted us with our stacker transporter, pretty easy to deal with and straight up with the answers before you give all you personal information. Good luck
Getting financed for conversion on an older truck - We looked at doing the same thing. Problem is you own the truck out-rite, so most require an add on to your title or release of title to them for liability should you default. Contact Kevin at RV Lending, he assisted us with our stacker transporter, pretty easy to deal with and straight up with the answers before you give all you personal information. Good luck


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