Help Your Lender Help You

The most dreaded part of applying for a business loan is often the tremendous amount of documents and paperwork requested by the lender. People are surprised about the extensive degree of information that the lender requires. But this information is vital to the lender, and you as a business owner should be sensitive to this point of view. The information provides the lender with details about such items as the amount of your loan request, the status of your business, the proposed use of the loan proceeds, the value of any collateral assets, and the financial condition of your business and all of its owners.

The size of the loan proposal will not necessarily enlarge or reduce the list of required information. The lender's need to understand the borrower's situation, financial condition, and prospects for repayment is unwavering, whether the loan is for millions of dollars or just a few thousand. The degree of actual scrutiny could be greater on larger transactions, but the borrower's command and presentation of this information is no less important, regardless of the size of the loan. Simply giving the lender what's required actually eliminates one reason for denial of your request.

Since every deal is different, there's no comprehensive list of required application information. No two loans are alike -- the lender, the borrower, the business, and the situation are all unique in every transaction, with very little duplication. All of these characteristics, and hundreds of variables, can change the information requirements that you'll have to fulfill. Even the lender will not know everything that may be needed until the review process actually begins.

Your level of preparation and degree of cooperation will determine your desirability as a customer in the eyes of the lender. If you make it difficult for the lender to get additional information or documentation before the loan is closed, he or she will likely assume that it'll be even more difficult to get such information after the transaction is made. On the other hand, if you're responsive and cooperative in meeting these additional requests, it will demonstrate management capabilities, facilitating further consideration of the proposed loan and actually bolstering your chances to receive it.

When supplying information to the lender, you should assume that the lender does not understand your industry's jargon or abbreviations. Technical terms and methodologies should be clearly explained to ensure that the lender can follow the reasoning of your loan proposal. By assuming that the lender has no familiarity with the business, your application must therefore communicate precisely what you want to accomplish and how you propose to pay for it.

When applying for a business loan, it's essential that you know not only the fine details of all of the requested documentation but also what the lender's analysis will conclude. For instance, sometimes a business will have periods of slower performance or other events occur that may raise the lender's concern. You should be prepared to discuss those exceptions and to produce documentation to support your explanation. By anticipating the need for these items, you demonstrate the relevant business management skills of organization and competence in financial affairs.

Although often overlooked, it's absolutely crucial to provide clean, clear, legible documents to the lender. Everything should be reviewed prior to submission in order to eliminate incomplete pages, poor copy reproduction, or out-of-sequence documentation. These types of errors can cause confusion and distract the lender from the actual information that you're submitting.

Finally, if you cannot supply a particular document or other information requested by the lender, it's important to give an honest explanation as to why along with a timeframe for its availability. By doing this, you'll be exhibiting the characteristics of honesty, forthrightness and accountability to the lender. After all, there's no law that states that you can't take a negative situation, turn it around, and use it as a positive one.