Part 4-Packaging Your Application
Previous parts covered the overview of the process and the first three steps of the process. This part covers the final step, pulling the whole process together for presentation to a lender and answering follow up questions.
Depending on how long it takes you to gather information for the loan application, the timeline from initial discussion with a lender to loan approval is 30 to 90 days.
Packaging your story and the loan application should be handled with care and considered as a major sales presentation that requires considerable attention to details.
You get one first impression so you want the document to present well. In fact, if you have a standard customer sales presentation documented, it is good to include it in the package with the loan application.
Most loan packages begin with an executive summary of your business that, as mentioned previously, leads to the details of a mini business plan.
Key information that needs to be spelled out succinctly in the documents is:
- What is your market and who are your competitors
- Who are your customers and why do they buy from you versus your competitors
- How do you price, what are your gross margins and what is your market share (if you can determine)
- What is your core competency and what is your strategic advantage
- Discussion of risk factors such as customer concentration, supplier concentration, product obsolescence, changing technology, loss of key employees, changing competition and substitutes to your product
- What are your assumptions for growth of your business
- How fast could your business grow if you had unlimited capital (this sizes your upside potential)
- Trend analysis of history (number of customers, pricing changes, gross margins, inventory turns)
- Graphic presentation of historical trends connecting to forecast (line charts or bar charts)
- Documents that may support forecast assumptions added as appendices
While this may seem to be a lot of information, much of it is probably already in your head and just needs to be committed to writing. This process quantifies and monetizes your dreams for your company.
Be advised that funding will not come without strings attached. All debt has covenants and restrictions on your financial activities as protection for the lender.
You must examine these covenants carefully with your attorney and other business advisors to ascertain if you can run your business within those restrictions. It is a good practice to fit these restrictions into your three year forecast to see if you will potentially be in breach of those covenants.
If breach is likely or highly possible, you should discuss these scenarios with the lender to have modifications to the covenants up front or some stair-step annual changes added into the documents. This upfront analysis and dialogue with the potential lender means your relationship will be a lot smoother down the road.
C Squared offers a process and guidance through this analysis. Contact us for additional information. We Welcome your call at 303-417-6353.