Maximize your chances of success by learning the seven ways to guarantee commercial lenders will approve your financing request. Here are tips and strategies for securing funding.
1.) Credit – The FICO is your snapshot of how well you manage your credit. Keep a personal FICO of 600 or better. You will need 680 or higher to boost your chances with the SBA.
2.) Time in Business – The longer the better. One to two years minimum. 5-10 years puts you in strong territory for financing.
3.) Cash Flow – How are you managing the cash in your business? What stays in the bank? If you are crushing sales, lenders will favor the cash flow over credit and time in business.
4.) Profit – If 2020-2021 profits were lousy because of COVID, some lenders can look past it.
5.) Industry Type – Some lenders are better at certain industries than others. This is why it’s best to work with a capital advisor who will have access to multiple banks and know who can provide you the best outcome.
6.) Use of Funds – Lenders want to understand what you’re planning to do. Tell the story. How you will grow the business? Drive revenue and profit? What does moving or expanding your location do for the business? Why are you launching a new product or improving an existing one? Why are you adding more inventory?
7.) Ability to Repay – Lenders look at your debt service coverage ratio = Net Operating Income divided by the Annual Debt Service. Even if you get approved for less, use what you get and scale. Repay it quickly to get more financing down the road.
Coming Up – Understanding what global underwriting is and how it affects your financing request
