Steps that allow to be comfortable
Steps that allow lenders to get comfortable with small business borrowers
Small and mid-sized businesses often face very challenging economic environments and struggle to compete against not only their peers, but also larger competitors who have the financial means to outcompete them through the usage of greater resources. Small businesses often are able to get a competitive advantage by servicing local markets or by providing a niche product or service to meet an unfulfilled need. When opportunities present themselves, it is often essential that these small businesses are able to take advantage of these opportunities to get a leg up on their competition. Whether through an expanded location, an acquisition of a competitor or another firm on the vertical or horizontal supply chain, or simply to obtain working capital until business turns around, a small business loan can provide a business with the financing they need to succeed in the marketplace.
Getting access to this capital can be challenging, particularly if the company does not have a strong earnings history. Lenders can be very skeptical that a small business will be able to repay their loans and gaining comfort of the small businesses financial capacity is often an insurmountable challenge for a small business. Contact Certified Business Loans for a fair assessment on what your options are,
To bridge the gap, lenders often require some ancillary items to support the loan that they are making. While business liens, particularly on real property, can provide some assurance to a lender, many small businesses do not own real property and lease their premises. Personal guarantees from the owners of the small business to support the amount being loaned are commonly requested and granted as further support for the extended loan balance.
Beyond this borrowers often seek to support their assets and earnings history and potential which is often accomplished with financial statements audited by a certified public accounting firm. Audits can be expensive for a small business and some lenders will accept reviewed or compiled financial statements, or even a tax return. These provide less assurance to a lender but help to support some of the figures being reported and to put data into a format that a lender can digest.
Small businesses will typically submit budgets to project their ability to repay a loan and will have to abide by certain financial ratios going forward to provide additional security for the lender. While some measure of trust is needed these steps will help to protect a lender and will provide some of the capital needed so that a small business can seize those opportunities when they arise and hopefully grow and develop their business.