Getting a bank loan approval is not always easy. As a result of more recent economic factors, banks have developed stiffer requirements when considering loan applications. We can help.
That first bank loan approval is typically the most difficult for a business just seeking capital from institutions. Each loan approval is unique, and factors like the recent credit crunch, regulations and ongoing fluctuations in the economy make getting bank loans more and more difficult each decade.
There are several considerations when getting a bank loan approved. First, it’s wise to review…
The Five C’s of Credit:
- character (or integrity and professionalism),
- capacity (ie., sufficient cash flow to service the minimum payments),
- capital (or net worth) ,
- collateral (ie., assets to secure the debt), and
- conditions (of the borrower and the overall economy).
Character (or integrity) of the applicant is a factor because it serves to support the application and the probability of the terms of the loan repayment being met.
Capacity to repay the loan’s minimum payments is self-explanatory. If you can’t pay the minimum payments, there is no way a bank will loan you the money in a straight-forward typical loan.
Capital (or net worth) is an essential component because it allows a liquid form of asset that could in theory be applied to collect the debt if other options fail.
Collateral are, of course, assets that can be liquidated to service or repay the debt if there is a problem later.
Conditions relates to the overall economic environment for both the borrower at this stage in their lives, of the bank in terms of how under-extended or over-extended the bank currently is, and/or of the economic environment in local and/or national terms.
Your bank loan is probably doable
Banks give priority to borrowers with multiple (or all) of these aspects covered in worse economic times, and likewise may accept only one or two of these in better times. For these reasons, many opt for an alternative source for their loans or consider factoring of invoices. Which borrowing method you use is determined by a host of considerations, many of which may be well out of your control.
To find out which borrowing option is right for you, contact us to set up a chat.
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