How to Shorten Your Business Financing Journey

journey road

The Current Business Financing Marketplace

Today’s credit marketplace makes it absolutely imperative that business owners take pro-active steps prior to submitting an application for financing.  If you have been through the process of asking for business financing, you’ve probably experienced that helpless feeling of not really knowing what the outcome will be, even if you are the perfect borrower, until the very end of the process.  In today’s credit market, even the near perfect borrower is floundering their way through the lending process. We’ve found it more important than ever for business owners take action to set themselves up in the best possible light to an underwriter before applying for that equipment financing, business loan, or any kind of business financing.

The Three C’s, or is it Four or Five?

A major challenge  that business owners have is not knowing exactly what to do to look good in the underwriter’s eyes.  Many business owners will base their actions on past experience with their bank, however, in most cases the bank doesn’t fill you in on why you were denied financing, or why you are getting the rate you were given.  You may have heard of the three C’s of underwriting: Credit, Capacity and Collateral, which is a common explanation of the criteria used to underwrite financing requests (though some underwriters say they use four C’s and five C’s). This doesn’t provide any guidance on how to position yourself and your business for financing.

Four Must-Do Steps Before Seeking Business Financing

  1. Start with the end in mind: Ask yourself what will be the return on your investment – does the money saved or additional revenue from the investment outweigh the cost? Make sure you measure all applicable factors. Besides the direct revenue increase or cost savings there may be indirect factors that may affect the net cost of the investment.  One important savings to make sure you know about is Section 179.  We’ve prepared a website to answer all of your questions in this area at Section179.info.
  2. Review your personal credit: Your personal credit score factors into almost every financial transaction made. Some you may know about (business financing, auto financing, mortgages) but others you may not (car insurance, employment, property rental decisions). There are three major credit bureaus (Experian, Equifax and Transunion) – check each one to insure everything on your personal credit is accurate if your scores aren’t where they need to be.
  3. Review your business credit: The primary business credit reporting organization is Dun & Bradstreet (though Experian and Equifax also have business credit reports). For business loans and equipment leasing, this source is used frequently.  The first step is to make sure you have a listing with Dun & Bradstreet - some newer and smaller businesses aren’t registered with Dun & Bradstreet at all. Once a business is registered, Dun & Bradstreet collects information such as year started, revenues, SIC code and a Paydex Score (a system developed by Dun & Bradstreet). Inaccurate information with this source can hinder business financing efforts.
  4. Understand the market: To help understand what you’ve learned from your business and personal credit reports, review our past webinar -”Insider’s Guide to Personal and Business Credit”. Also, understanding the borrowing activity in your industry and your region can not only help you understand the current financing landscape, but it also empowers you to adjust and target your customer base as you begin to understand trends in your area month over month.

Join Direct Capital On Facebook | Follow Us On Twitter | Subscribe To PointBlank By E-mail

4 Comments on "How to Shorten Your Business Financing Journey"

  1. Unsecured Small Business Loans November 19, 2009 at 3:58 pm ·

    Starting a business can be an exciting venture because you are finally seeing an idea spring into life. When you are about to start your venture, it is vital that you have a clear strategy of how you will execute your idea. A business plan should include a step by step description of how you intend to manage and market your business. An important aspect of any business is the finance one. It is sometimes difficult to have all the money you need. Therefore you may have to look at other options to get adequate funding.

  2. Angela November 28, 2009 at 4:38 am ·

    I think a forum is the best way to find a solution for a problem. I am running a small business ($ 850, 00 annual revenue). I joined the Small Capital forum where I could find solutions by asking others about what they did with a particular problem. Now, I can learn from their mistakes! It is great!!

  3. davecriswell December 1, 2009 at 9:33 pm ·

    Angela, I agree, it’s great to be able to leverage the experiences of others. Most problems we experience in business are not unique and chances are we can find someone who has experienced the same thing and figured out a solution.

  4. Myrina Stein August 3, 2011 at 6:46 am ·

    Hi,

    I was surfing net for some finance articles when I got your site and found that it’s a good site blog.directcapital.com with useful and informative articles.

    I am impressed with your site as it is helping people in taking their financial decision. So, I would like to send an article for a guest post in your site based on debt theme. My article will be unique and quality one article and also help your site to get more traffic. In return you will get a back link from a quality site.

    Please reply me as soon as possible whether I can be able to contribute my article here.
    Please let me know your thoughts. Waiting for your positive reply. Reach me at: myrina (dot) stein (dot) 888 [at] gmail (dot) com

    Best Regards,

    Myrina Stein
    Webmaster

Leave a Comment