WHAT DOES A LENDER LOOK FOR IN A BUSINESS?

There are a number of factors that lenders look for when a business owner applies for a loan. Depending on how they view the factors, they can determine whether a business is eligible for a loan or not.

ALWAYS MAINTAIN A GOOD CREDIT HISTORY

Businesses and business owners each have their credit score and history. The lender examines the credit history of the business. If they see that the business owner has made their payments consistently and on time, then that’s a good sign. A question often asked is “What if a business does not have a credit history yet?”. The simple answer is that the business owner’s credit history is analyzed instead.

BUSINESS STABILITY IS IMPORTANT

A business has to be able to prove that it is stable. Now, what does a stable business look like according to a lender? A lender primarily looks for these three factors: how long the company has been in business, the number of customers/clients a business has, and a consistent sales volume. In order for a business to successfully receive a loan, the lender has to approve all three factors. 

A POSITIVE CASH FLOW

Your company's cash flow and debt levels are what matter. The "debt to income" ratio, or how much of the company's monthly income is utilized to pay the debt, is the first indicator that is considered.

The "income to debt payments" ratio, or how much the company spends on debt payments, is then examined. Then there is the "amount of debt," which is the total amount owed, and finally, there is the category of loans that a company has.

Lenders take into account several factors before approving a loan request. Although, keep in mind that lenders do not always factor in everything we have mentioned in the article. It depends on the lender and their primary requirements. 

Make sure what to expect when you apply for a loan. If you want to learn more about our loans, contact us.