What
Lenders Potentially Look For in a Borrower
These
days in a rapidly changing financial environment
it may seem a mysteryas to just what is needed
to be done in order to raise commercial finance
for a business.
There
are four main attribute most standard lenders'
commercial finance underwriting will look for
in a business:-
Good
Credit History
How
to satisfy credit control. The lenders will
conduct a thorough credit check on the borrowers
or business in order to establish the credit
history. This gives the lender confidence that
what happened in the past is an indication to
possible future events. So no missed loans or
mortgage payments. They will also look for any
missed payments taking the company into unauthorised
overdraft.
Serviceability
This
basically means the ability of the borrower
or business to pay back the monthly payments
due. So they will wants to see healthy income
that covers overheads and also makes a plus
net profit. They will have to be a profit continuity
to this, over some time as shown on the trading
accounts. A low income multiple will be used
to gauge this.
Securitisation
A
healthy low loan to value where the borrower
will place a considerable amount down to reduce
the amount of lending say for example a 40%
deposit is a good start. The lenders may be
looking for extra security for the deal. An
example would be for the borrowers to potentially
allow a charge to go on other business properties
or on the directors personal homes. There must
be enough equity in the properties to do this.
Trading
History
The
lenders will be looking at how long the business
has traded for successfully. To check that the
company is not too highly geared. To see there
is a good future for the business which must
be in a profitable sector. This all reduces
the amount of risk that the lenders will be
taking that will be reflected in a reasonable
rate.
Further
broker advice
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