A frequent question asked by both buyers and sellers of a business is what is a bank looking for in the loan package. Harlan Friedman of Lightning Commercial Funding recently sent out an excellent summary that answers this question:
The Loan Package
An underwriter while viewing a loan package needs to get a true feel for the deal, they have certain questions and criterions that need to be met. Below are some of the important issues that are raised in the underwriters mind and the corresponding sections of the professionally prepared loan package.
A properly prepared package should answer the following inquiries by the review underwriter.
Does the business in question have a positive cash flow that is supported by historical documentation?
This is answered by including the appropriate financial statements and tax returns
Can the business support additional debt?
This is answered by taking a comprehensive look at the current as well as the future cash flows. Also it can be determined by the seller’s discretionary income at the end of the day.
Is the individual that is attempting to secure the loan qualified to run this business?
This is answered by the inclusion of his current resume, as well as any supporting documentation.
Does the prospective purchaser have marketing and business plan to demonstrate knowledge of the business as well as their plans for repayment and future growth?
What are the projected revenues for the new business?
What is the current financial situation of the borrower?
If a buyer of a business just walks into their local bank, and does not have an individual who knows and understands the process the loan will definitely take longer. But a professionally prepared package answers all the above questions that an underwriter needs to have handled and thus makes the time frame for approval and ultimately closing much faster. For more information on business loans, please visit Harlan's website at www.loanforbiz.com
If you are thinking about selling your business, or need more information on the process, please visit our website at www.empiresandiego.com
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