Borrowing Checklist: Grease the Gears with Organization

Keeping your borrowing information organized and at the ready is a key to receiving quick decisions from any lender.

For most leases under $75K, one-page credit application and a few months bank statements. However if you are looking for a higher dollar amount or a special circumstance arises, more information is often needed. To save time, frustration, and possible declines take a few steps each year to keep updated information at the ready.

At First Star Capital we look at applications at many different levels of preparedness. Having seen our fair share of applications, our initial screeners have a good idea of how far an application package will go based on how well prepared the application is.

The following is a list that Sam Thacker from Allbusiness.com has put together, with a synopsis from our own experiences at First Star Capital:

1. “Make sure all shareholders who own more than 20% of the company, know what their credit scores are.” Shareholders that own large portions of the organization (20% or more) should know about any negative characteristics on their personal credit. If these shareholders are not in the process of fixing these negative aspects of their credit, they should do so quickly. These negative marks on credit can become easy targets for lenders to focus on. Fixing these aspects or having an explanation as to their reason will be necessary for many transactions to get past initial screeners.
2. “Keep accurate and up to date business organization records available in one place.” Having easy access to organized business formation documents is a great way of streamlining the application process. Many lenders will not just take your word on how long you have been incorporated. In fact, most of them will a copy of state supplied documentation. Having these files at arm’s length will greatly reduce any questions as to the legitimacy of your company, and speed along the lending process.
3. “Keep good accounting records.” First Star Capital does not require financial/accounting records for deals under $75,000. However, for transactions that require larger lending amounts, financials are almost always required, and having detailed, organized, and audited accounting records will reduce many headaches in your borrowing future. The reports that are most commonly requested are Income Statement, Balance Sheet, Statement of Cash Flows, and Tax Returns.
4. “Have all shareholders who own more than 20% of the company, keep a personal financial statement up to date.” Personal financial statements for large stake holders in the organization are often just as important as their credit score. Typically up to date personal financial statements are best, but it is acceptable to receive some up to a year old.
5. “Management should keep busy.” Corporate information is easier than ever to retrieve. Management should make sure that all taxes and governmental reporting has been done properly and on time. Lenders initiating due diligence will quickly discover any discrepancies in these records, and will quickly disengage.

85% of all U.S. based companies are currently or have leased some sort of equipment to operate their daily business. Is your small business prepared when it needs to submit an application for a lease? Here is part one of two of a “Borrowing Checklist.”