In the second part of our commercial case study series, we?re going to continue the story of our clients. We?ll explain here how we helped them present their application for finance to lenders in the best possible way.
The story so far: our clients had contacted us, wanting us to help them arrange finance to purchase a small hotel. After discussing with them their aims and objectives and their current financial position, we assessed the appetite of lenders for the deal and we take up the story now with our commercial team ready to put together an application.
Every lender has slightly different requirements when it comes to commercial finance applications. Unlike most residential mortgage applications, commercial finance applications are considered by an underwriter ? an actual person, not just a computer algorithm ? who looks at each case individually, rather than going by a set criteria. Where a commercial finance adviser can help you particularly is with the knowledge they have of each lender and the sort of information they want to see with an application.
After considering our client?s proposal, we had a few lenders in mind to submit our clients? case to. Our next task was to gather the information and paperwork required by those lenders which would best support our clients? application. Depending on the circumstances of each case this can be an extensive exercise, often requiring input from people such as your accountant and solicitor.
We always work closely with any other professionals involved with your business to make sure the whole process of your finance application goes smoothly. We?ll liaise with everyone involved and when necessary, chase things up if there is a delay with anything.
One question we?re regularly asked is: why do lenders require such a lot of information?
Although it can be a frustrating process at times, the reason for the amount of information lenders require is ultimately for your benefit as a borrower. Lenders need to understand the personal financial lifestyle of any potential borrower so they can fully assess how much financial pressure they will be putting on the business by taking on the financial commitment of a loan.
Some of the questions lenders will want answers to are as follows:
? Will there be sufficient trading profit to meet the repayments of the business borrowing and cover the personal financial commitments of the owners, and still leave a safety margin of retained profit in the business?
? How do the borrowers use their existing bank accounts?
? Are the business?s accounts in order? Is there any evidenced of unpaid items?
? How long has the business been trading?
? Are there copies of at least 2 to 3 years? trading figures?
If you are seeking finance for a new business, then the lender will expect to see well-substantiated trading projections, which is where an accountant who is familiar with the type of business in question will be really useful.
As well as the answers to these questions, the lender will also need information on the assets that are going to be used as security for the borrowing, such as a copy of sales particulars for the property being purchased, which was the case for our clients buying the hotel.
Once we had all the relevant information gathered together for our clients, we prepared an overview document that explained their proposition to the lender. In the document, we referred to the evidentiary trail of documents and requested formally that the lender consider the proposition in the light of the information provided.
So the ball was now in the lender?s court and we were awaiting their verdict. Would the lender accept the proposal, allowing our clients to borrow the required money and purchase the hotel, or would the proposal be rejected?
We?ll tell you how the story ended for our clients in our next article.
For a free consultation about your business finance, call Worldwide on 0845 230 9876 or?e-mail info@wwfp.net or take a look at our website www.wwfp.net.
Your business assets may be repossessed if you do not keep up repayments on a mortgage or other loan secured on it.
Source: http://www.wwfp.net/preparing-the-case.html
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