What Lenders Look At To Approve You For Financing

By Walter Nunez & Yhordan Serpentini

Business Financing can be challenging particularly for start-up companies. Lenders tend to be cautious, and they want to be sure you will be able to pay them back. There are several options you may seek lending which include: Traditional lenders (banks), Online Lenders, Microlenders, and SBA.

1. Meet The Minimum Risk Score

A common theme throughout all the lenders is if you meet their minimum risk score. Lenders leverage the 5 ‘c of credit to determine approval or decline with Credit, Cash Flow, and Collateral being the most critical ones.

There are other factors that are considered in a decision such as industry type, industry experience, and purpose of funds. Having a business plan can help address these risk concerns.

2. The amount of Lending Requested

The amount and type of lending product requested will determine how strict or streamlined the approval process will be. It is important to evaluate your options with your lenders and ask questions, BUT it is possible you get vague generic answers due to banking regulations.

Lenders must be careful not to discourage applicants and that can be tricky if the answer to your question is discouraging. That is the reason why a lot of applicants are encouraged to apply first.

3. What to Do If You’re Seeking Funding

If you are seeking funding for your business of any type, it is crucial for you to do the following:

Evaluate your business credit and/or personal credit history.

Evaluate your cash flow with your monthly statements and/or Profit Loss Statement.

Evaluate any assets that can be pledged as collateral.

The above bullet points are a strong starting point to bring into a conversation with a lender. If you have any questions or would like guidance in the process, we are here to help. Please do not hesitate to reach out to us and we will be glad to assist you.