Do not make a last – minute request for financing. Waiting until the last minute to request financing can hurt your chances for approval, especially if you don’t have all the right information and documentation needed. You need to to allow the bank or investor plenty of time to go through its own procedures. There can be a lot of paperwork, analysis of your financial statements, credit checks,reparation of legal agreements etc.
Unseen Decision Makers
Major small business loan decisions are made by a group of people who remain unseen to the borrower. Commercial Loan Officers have the authority to approve loans up to a certain level. Bigger type of loans are normally approved by a “loan committee”.
Most lending institutions have a relatively formal committee and decision making process for handling commercial or farming loan applications. Depending on the size of your application, your loan may have to be submitted to a loan committee. Loan committees can have a wide range of authority. They usually consists of 3-5 senior managers around a table considering your application and it is therefore vital that you provide them with a proper loan application and well – structured business or farming plan.
Small business loans can be used for a variety of purposes. For example, a business loan can help you buy a business, start a new business, and expand your business. You will deal directly with the bank’s loan officers/consultants. Make no mistake however, major small business loans are reviewed by loan committees. Typically, loan officers/consultants are not part of a loan committee.
Increasingly all loans are reviewed via software developed by the bank you dealing with. The software analyzes data entered by your consultant and in some cases actually approves or declines the loan. Larger financial institutions will compare your financial ratios with those of their other customers in the same kind of business/industry and make comparisons to industry averages well.
Understanding your role and the role of the consultant and loan committee will help guide you through the approval process. It is a team game and no “I” in the team.
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