Unreleased UCC Liens

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Watch out for unreleased UCC Liens; they can slow down your financing request.

Whatever your Business Credit financing request, when you borrow money to grow your business, whether as a loan or a line of credit, the lender will file a UCC lien against your business. That lien protects the lender’s interest in your business in the event of default.

After the loan is paid, the lender is required to file a release of that UCC lien.  What businesses often discover, much later on, is that the Lender never cleared the lien. And, often as not, the business discovers this UCC lien lurking in the background only when they’ve applied for a new round of credit financing.  The new lending process is held up until the old UCC lien is released by the previous lender.

Growth sneaks up on you and you find yourself in need of working capital.  You need to apply for new financing and your lender gets you approved and they’re ready to close and they do a search and discover the unreleased UCC lien.

The worst part of this process, worse than slowing down access to your new round of working capital financing, is what you discover when you call the old Lender.  We’ve seen it with clients at Aurora Consulting.  The previous Lender says, “Oh, this happens all the time… You just have to call and let us know, and we’ll release it.”

Shocked? Yes, you should be.  This should be part of the lending process as routine as any other, but it’s not.

You can protect your business’s future need for working capital by taking some simple steps.  You can conduct active UCC lien searches on your business. Contact your local County Clerk’s office or Department of State website and conduct an search.   You can create a relationship with a local title company, and probably for a very reasonable fee that title company can do a fast, thorough UCC search any time you need it.

Or, you can follow up with a Lender once you’ve satisfied a loan, or paid off and closed a line of credit.  Request a written satisfaction notice from the Lender.  Once you receive it, follow up with the Lender within thirty days to verify they’ve filed the release on their UCC Lien.

You’ve got better things to do with your business than worry about slowing down a future financing process.  Taking some simple preventative measures today will help you promptly access working capital when your growing business needs it.

Visit our FINANCING FODDER YouTube Playlist for more info on how to manage your business loan request.

Getting Unstuck

Wall’s Ice Cream is a very popular ice cream brand in The United Kingdom.  The Wall’s logo is prominently displayed at convenience stores, groceries and restaurants and cafes all throughout England. Wall’s is apparently also famous for their “Stop me and Buy One” tricycles roaming the streets filled with ice cream treats.

I haven’t personally seen the logo there by visiting England.  No, I’ve seen the logo often when I watch my favorite British Detective mysteries.  But enough about me and my Brit-Binge.

Wall’s has been making ice cream for over 100 years, but Wall’s didn’t start out as an ice cream business.  No, Wall’s was a butcher shop!  T. Wall & Sons Ltd. was a sausage maker since 1786.  But in 1913, the owner, Thomas Wall, realized that his sausages weren’t very appealing to his customers during the warm Summer months.  He hit on the unique idea of selling ice cream during the Summer to increase sales and to save the jobs of his employees.

It didn’t hurt the bottom line, either. Now Wall’s survives over 100 years later, branded and thriving.  As an ice cream provider.

Would you make a similar choice in your business, a choice where you change your entire business model so that your employees are taken care of?

Do you have to make such a radical choice?

Maybe there is another way to demonstrate your sincere interest in the financial well-being of your employees.  In this economy of nearly full-employment, it is certainly in the best interest of businesses to hang on to valuable employees.  Time and again, successful companies have proven their success comes thanks to the people working for them, the people showing up every day eager to do their jobs and to see their employers achieve long-term success.  Surely it’s in the best interest of the employer to invest in those employees, whether that’s in small ways or in a radical way.

Like Wall’s, a company in business literally for centuries, but thriving in incredible ways for the past 100 years thanks to a small but ingenious investment on the part of its owner at the time.

Where will your business be in 100 years?

 
Visit our FINANCING FODDER YouTube Playlist for more info on how you can prepare a financing request that will knock the Lender’s socks off.

Two Most Important Documents

There are two documents that are the most important documents that you should include and have ready for immediate access whenever applying for financing.

First and foremost, your current Year-To-Date (YTD) Income Statement. At Aurora Business Consulting, we believe you should be updating your YTD Income Statement every quarter, but it couldn’t hurt to update it every month. With automated bookkeeping software, creating a quick YTD Income Statement should be easy to accomplish.

The second important document to have at the ready is a comprehensive marketing plan. We don’t mean a one or two page marketing statement.  A comprehensive marketing plan with a full assessment of your marketing action plan, including specific strategies, Situational Analysis, demographics, SWOT analysis and cost analysis and expected outcomes is the recommended document to have at the ready.

Realistically your marketing plan should already be in place as a foundational element of your business operations.  In the event you need to apply for financing, and if there are changes to your marketing plan, you need only update the plan accordingly.  Especially if the financing request involves working capital for marketing expenses, or equipment purchases for the potential increased business revenues generated by your new marketing vision.

Why a marketing plan when you’re applying for financing? You know your objectives on maintaining and growing your business; the lender wants to know your objectives also.

With these two important documents, when you present the marketing plan and the income statement promptly and efficiently, it says something about your way of conducting business. You’re sending a clear signal to the Lender about the high quality methods you use to run your business; you’re giving the Lender a sense of “comfort” about the risk assessment on your financing request.

What if your financials are weak in certain areas for the last couple of years? The Marketing Plan also could potentially overcome some objections the lender has to something that’s weak in your financials.

The marketing plan shows the way you’re going to increase revenue either by something you’re doing already or something you plan to do which is why you’re applying for working capital or equipment capital.

Streamline Your Financing Request

Want to become a priority with the banker?

Summarizing your financing package can help to prioritize how your banker reviews your financing request.

We recently submitted a client’s financing request to one of the Lenders on our lending matrix.  Our Lender Rep. said, “Holy cow, you guys are on top of it with your summary. Not many brokers make it this easy to review the package.”

We made it easy because the client provided us with their financials. The financials were comprehensive. It’s a multi-million dollar corporation and we’re at the early stage of presenting to the lender. We want to show something that’s easily digestible. We want to ease  the process for the lender to give us a prompt review and tell us their interest in offering the financing.

Summarizing your financials is easy to do.  When you have a lot of line items that lead up to one, just one, type of deduction or one type of income source, simply summarize it. Drop it down to as few lines as possible so the lender can do a quick review and say,  “Okay, I see the picture here.”

The Lender doesn’t need to know the granular line by line details at this early stage; you want the Lender to give a fast review to gauge their interest. If the Lender expresses interest and offers a Letter of Intent for the financing, you can present the more detailed financials with your full loan application package.

For each financing request, present a one or two page statement describing the background of the business, the reason for their financing request, and, in bold, large font, the amount of our financing request.

Our presentation package for the initial Lender review is compact yet complete.  The “first glimpse” by a Lender is sufficient to tell us if that particular Lender is the right fit for our client’s request, or if we need to locate a different Lender.

Visit our Financing Fodder YouTube Playlist on how to prepare your business loan request.

Lessons, Lenders, Decisions and Documents

Lessons with Lenders and Decision with Documents

When we locate the right Lender to provide a financing solution for your capital needs, the Lender requests documents as part of the application process.  We prefer to collect and review as many documents as possible early in our qualifying process.

We review each document you submit.  We do this to determine your business’ qualifications for the different financing products available through our matrix of Lenders.  But we also review your documents to look for any issues that might arise in the financing request and to resolve those issues before we submit your request to a Lender. Not all Lenders require all these documents, and occasionally we prefer to submit certain documents only after a detailed conversation with a Lender.

The definition of a successful Loan Application is the approval you want, the approval you need, and the approval that meets your timeline.

Early on in our long experience working in the financial services industry, we learned the lessons of successful applications:

Lesson 1: The Application can make or break the deal.  The Application is the source of all information and, ultimately, the guidepost for processing and Underwriting.  The more complete and accurate an Application, the better the Underwriting RESULT.  That RESULT is not only an approval, but a timely one.  The complete Application typically anticipates the Underwriter’s thinking and answers questions before they’re asked.

Lesson 2: It’s all about the paper.  Yes, even in the 21st Century (is it time yet to say, “Beam me up, Scotty?”), you have to support your Application with documents.

Lesson 3: The front-loader.  When you submit your Application with a complete basic set of documents at the onset, your process moves much quicker along to the goal line.

Lesson 4: Give ’em what they need, not what they want. Many times a Lender and/or Underwriter will ask for more documents than are necessary.  We’ve learned time and again to push-back on certain documents requests.  Often, we’ll ask the Underwriter for a valid reason for the document request.  Piling more documents into the Application package simply because they “want it” slows down your approval timeline.  You’d be surprised with how many times a requested document isn’t actually needed for the loan approval.

Lesson 5: Garbage in, garbage out.  A single document, presented incorrectly, can torpedo your financing request.  At the very least, a document that presents a challenge to the loan approval process should be presented with an accurate explanation, whether the document provides a positive or negative aspect to the entirety of the Application.  We learned long ago the value of the phrase, “Garbage in, garbage out.”

Lesson 6: Underwriting is Subjective.  Underwriting is more a subjective than an objective process. You want your Application to move quickly through the system for one important reason: don’t give the Underwriter time to develop a dislike for your Application.  When an Underwriter can move efficiently and quickly through a Loan Application, they don’t have time to develop negative opinions about the Application. The lingering-loan-application simply provides an Underwriter with more time to excessively scrutinize details that may not really be negative, but can develop into a negative aspect in the Underwriter’s subjective way of thinking.  You know, they’re human too.

Subscribe to our Youtube Channel and check out our video on DIY your Business Loan Application.

Visit our Financing Fodder YouTube Playlist for more information on how to prepare yourself when requesting a business loan.

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