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Most
everyone knows that a loan transaction is a two way street.
Lenders and borrowers are the players.
Lenders are the professionals and have a decided advantage over
the borrowers when it comes to "knowing the ropes."
In order to get the Lenders to open their vaults, borrowers
need to know how to speak lender language and get to know the lender
mind set.
Just
because lenders are in the business of lending money and appear to be
in aggressive pursuit of new clients, the rules of the game are pretty
conservative.
Most
lenders and especially the banks and savings and loans are governed by
many federal and state regulations.
Most of these institutions have their loan files reviewed from
time to time and the basic foundation of the loan transaction has to
make some sense. In
addition, traditional lending standards come into play along with a
desire by the lender to have the loan repaid satisfactorily and
certainly not to lose the funds altogether.
The
beginning of a borrower-lender dialogue is to know exactly what your
financial needs are and how that fits with the lenders own loan
products offered. Assuming
the lender you are going to approach offers the financial product you
seek, you have set up the basis for a dialogue.
If this is not the case, you are wasting your time.
Once
you establish a dialogue with the lender offering the product to fill
your needs, you the borrower need to arrange a proposal that fits
within the categories of the lender language and descriptions.
In
another part of this volume we have described the types of loans
available. Pick one that
fits you and draft a proposal within this category.
If you are a commercial borrower doing
business with a Bank or Savings and Loan Co., it is likely that
your loan request should be framed within one of the following basic
categories:
1. Asset Based
Loan: This will be the type of loan that most businesses or
corporations use with lending institutions.
In this type of loan, all of your business assets will be
considered as collateral-accounts receivable, equipment, inventory or
basic materials that make up your product.
Hopefully, the value of these assets combined will equal 130%
of the loan amount you are seeking.
Of course, the borrower will have to present the necessary
operating financials to show that the debt requested can be serviced
from operating income.
2. Accounts
Receivable Financing: If
you are a company that relies upon sales financing, then you will find
accounts receivable tying up a large amount of capital.
Most companies have to periodically turn these receivables into
cash to continue to pay their own operating expenses.
Banks and Savings & Loan institutions often will take these
receivables as collateral for loan advancing up to 80% of their value
if the accounts are current.
Loan
types in order to (l) know what lender to approach (2) is able to
carry on a dialogue with the lender concerning that type of loan and
(3) be ready to offer the necessary collateral documentation required
by that type of loan.
In
conclusion there is no single item of greater importance in good
communication between lender and borrower than a complete written loan
proposal. In the case of
commercial or business projects that loan proposal should be backed up
by a solid business plan.
Most
of this part is directed to the commercial borrower.
It is no less important for the consumer or individual seeking
a loan to familiarize him or herself with the material and approach
that will ensure a good borrower and lender dialogue.
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