When it comes to finding working capital for your business, there are a few rules of the road that you should pay attention to, to increase your likelihood of actually getting the amount of money that you need. While each lender has their own unique set of qualification requirements, there are some that are universally constant, across the board. The problem is that, if you don’t know what they are, and no one never told you, you could be just playing a time consuming and costly guessing game, where the odds are that you will be disappointed with the outcome. To minimize, if not eliminate such possibilities for you, here are the top 4 things that you need to pay attention to, before you submit your application.
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- Be honest: It is amazing how many people try to mislead lenders by providing wrong information, whether unintentionally or intentionally. The odds are remote that you will be successful, and if anything, you will be denied when the story “doesn’t add up”. No one is going to read you the riot act if you made an honest mistake on your application form, but things like using the wrong Social Security or EIN numbers, misrepresenting your outstanding loans or other debt, hiding previous bankruptcies or current IRS liens, or representing that you are the sole owner of the business, when the facts reveal that you actually have a partner or two, does little to help your credibility and doesn’t get you any closer to getting the funding that you need. We have a broad portfolio of lenders that can accommodate even the most difficult of funding scenarios, so there is no need to hide or withhold anything. The more information that we have, the smoother the process will flow.
- Keep a “clean” bank account: As part of the initial qualification process, most, if not all alternative funding sources will want to see at least your last 3 to 12 months of your business’ bank statements. More than anything else, this provides the crucial insight that reveals to the loan underwriters your company’s financial picture, which plays a major role in assessing your overall risk profile. Lenders also look for important trends in your revenue picture: are you growing month-over-month or are you in a decline. Bank statement also give an indication of your fixed or recurring payments, especially to other lenders, if any. The bank statements tell more than your credit risk profile. Lenders frown on bank accounts that have monthly recurring negative items, such as multiple overdrafts each month, NSFs and negative ending balances. It is imperative that you keep these instances to a bare minimum, or better yet, try to not have any of them.
- Show consistent income: Lenders just love to see regular, consistent deposits to your business bank account. Among other things, this suggests stability, which lowers your risk profile and puts you in a favorable position for funding. More than anything, they like to see steady, increasing deposits.
- Be careful with tax liens, bankruptcies and judgements: While these items may not immediately disqualify you for a loan, it oftentimes slow down the process. Fortunately, most alternative lenders have contingencies to facilitate such situations. First, most will require that tax liens have a current payment arrangement with no missed or late payments. With bankruptcies, most lenders require that a certain period of time has passed since the discharge., usually 1-2 years, or that a similar period of time has been passed since its discharge and they may require proof in both cases.
Paying attention to these basic tips could mean the difference between receiving the funds that you need to grow and thrive or just stagnating and hanging on.
About Fairfax Funding:
Fairfax Funding, LLC., is an alternative financing brokerage that focuses on helping small businesses, real estate investors and startup entrepreneurs to gain broader access to a wider range of funding options than are traditionally available.
