Have you ever applied for a loan only have it sit on your lender’s desk for days without an answer?
Chances are this has happened to you. The reason for this could be the obvious- your lender is busy with other applications or possibly out of the office. There isn’t much you can do about this other than letting your lender know up front that you need an answer by a certain date so they can better accommodate your request.
More often than not, the reason for the delay is due to incomplete or inaccurate information that you provided your lender or your lender doesn’t have a clear picture of your operation. The quality of the information provided to your lender has a direct impact on whether or not your loan is approved. By providing the following information, you can help to ensure you get your answer sooner:
1. Detailed Balance Sheet that is within 30 days of being current.
I can’t stress the word “detailed” enough. If you operate as an entity, you will also need to provide a personal balance sheet.
Assets:
- Don’t forget to list everything. Just because you list it doesn’t mean the lender will take a lien on it, but if you owe more than you own – a bank isn’t going to loan you more money.
- The most often omitted assets are cash in the bank, accounts receivable, investment in growing crops, prepaid expenses, and the value of your home. These items can be significant.
- Provide copies of your latest bank statements. Lenders can’t just take your word for what you list. They will need to verify the information. If you can provide them with a statement, you can save them time.
It is also important to list your property owned, including who has a lien on the property.
- List crops by type, quantity, unit and estimated price. Example: Corn – 75000 bu @ 3.75/bu = 281,250. List livestock the same way. Be sure to break out breeding livestock from market livestock. Also provide weight and price per pound values.
Liabilities:
In order for a lender to know if you can repay your loan, they need to know the terms of all of your other loans.
- Don’t forget to list credit cards and lease payments.
- Provide payment amount, due date, interest rate and maturity.
- List how each loan is secured.
- Don’t forget to list loans you have co-signed for others.
- It is helpful to provide the lender with a copy of your latest statements, if they are available.
2. Historical Balance Sheets
I always ask for a couple of older balance sheets so I can see how the operation has changed over the years.
3. Income and Expense Projections
If your operation isn’t changing, your lender will generally use historical averages. If the new loan will be accompanied by changes in your operation, you will need to provide income and expense projections to account for the changing operation.
4. Credit History
Be upfront about any late payments or problems that will show up on your credit report. Discuss why the problem occurred and what you did to correct the problem.
5. Corporation and Partnership Documents
The lender needs to know who has the authority to sign on behalf of the entity. Provide copies up front.
