The good news is that Banks are lending again on a limited basis for non-disaster loan requests. The bad news is that the loan products are limited and the underwriting guidelines are very, very restrictive.
Many industries/businesses are excluded from loan programs. Banks simply cannot determine yet the viability of the businesses to survive the pandemic. Risk is too high and thus doors to the lending vault are tightly shut.
Today we spoke to a Bank on four different loan scenarios. Each of these businesses has challenges on their loan applications of different sorts, whether it’s credit, cashflow, type of business, COVID-19 impact on the ability of the business to earn income.
In the hour-long conference call with the Bank, thanks to our qualification process here at Aurora Consulting, we easily addressed the Bank’s concerns and answered their (often) difficult questions as they assessed the risk on each loan scenario. In three out of the four scenarios, we received positive feedback of interest from the Bank. While this interest does not guarantee a loan approval, this, in our experience is a giant hurdle we overcame.
The rest of it is the loan process.
We also spoke today with a prospective new client in a follow up to our initial call last week. This client seeks over $4Million in funding for a unique business, a business for which many Banks and Lenders do not provide funding due to their lack of understanding of how this business operates.
We had already identified a Lender for this financing request.
In our follow up call today, the prospective client indicated they would soon make a final decision on moving forward with Aurora Consulting to secure the financing. They also indicated they were working on their credit.
STOP. RIGHT. THERE….BEFORE we go any further. (Meatloaf medley playing).
A client should not “work on their credit” without proper guidance. Luckily, we provide that kind of guidance here at Aurora Consulting. While we don’t believe in credit repair/restoration, we do have decades of expertise with credit and we also know the appetite of commercial lenders when it comes to credit. Note: We have not yet seen this person’s credit.
Our process at Aurora Consulting includes running a credit report as soon as we sign a consulting agreement with a new client. We do this so that we can anticipate any issues that could slow down or prohibit the lending process. We do this upfront so that we can provide advice that leads to a positive result for our clients.
The same holds true for our entire process. We review all financial statements, business plans, marketing plans and any other pertinent items in the early days of working with a new client.
We do this to anticipate and resolve problems a Bank or Lender may have in the future.
When you apply directly to a Bank/Lender for commercial financing, these items, credit reports, financial statements and the like, are not seriously reviewed until the very late stages of the loan application process. By then the applicant has spent time collecting and submitting documents and spent money on application fees, appraisal fees and other associated costs.
Literally most Banks/Lenders do not run a credit report until the very final stage of the application process, weeks or months after the initial application. At that point, if a credit issue arises on the credit report, all those weeks and months of work are quite literally flushed down the toilet and the loan is declined.
Our role as your financing Broker is to review all relevant documents, including a credit report, in the early stages of your request, before the application, before we’ve even considered conversing, in depth, with a Bank/Lender.
That’s why today, we hit the mark with 3 out 4 of our loan scenarios getting the green light from a Bank to move forward to the application process.
We were prepared for every question and concern the Bank had because we’d reviewed credit and documents. We anticipated problems in advance and could converse honestly with the Bank on possible workarounds for those problems.
It’s what we do, because we are the business-owner’s advocate. We work for the business-owner. We would be remiss if we didn’t share with you that banks call us when they can’t underwrite the loan. So we understand their process.
Ask us any questions when it comes to business loans. If you want your business to survive, and THRIVE despite the worst crisis we’ve seen in our lifetime, please call us with your questions.