Visit Our Learning Center - Understand The Process Before Borrowing

Before Borrowing

First, Run a Virus Scan

This is likely the most important tip that you read today. Every day thousands of people around the world lose very private information because they assumed their antivirus software was working properly. In many cases they assumed they had an antivirus package installed when they did not. Always, and that means ALWAYS make sure your antivirus software is up-to-date and runs DAILY on your desktop or laptop system. It takes just minutes to make sure you are up-to-date and have run a full system scan. If you have malware or a virus infecting on your system it means your private information will be (and likely is) public. Do not rely on "free" antivirus software. Pay for it so you have a subscription that keeps you up-to-date on the latest protections. There are many antivirus makers available such as BitDefender, Eset, Trend Micro, Norton Security, Kaspersky, WebRoot, and some others. When given the choice of free or paid, choose paid, it gives you a subscription so it stays up to date. Anyone that uses a web browser and thinks they don't need antivirus protection needs their head examined.

Treat Every Document Securely

Many lenders and investors will ask for a very large collection of sensitive documents such as bank statements, financial statements, credit information, etc. That's very sensitive and private information. Think to yourself "do I want the world seeing this information online?" and very likely you will say no. If you are asked to send your documents electronically be absolutely sure any website you use has a url that starts with HTTPS and not just HTTP. The "S" in HTTPS indicates the connection is mostly secure. Also be sure your browser informs you the URL you are working from is secure and valid. (Hint: Anyone can "self sign" a security certificate so be sure your browser recognizes the URL as valid and trusted.) Most browsers give you a pop-up warning or make the URL line in dark red if the connection is not truly secure. Even some antivirus software knows if a website is malicious so if your browser gives you an alert or your antivirus software stops you from visiting a site - don't use the site, period. Remember, keep your privacy in mind, all the time, and always be sure websites are secure via the HTTPS in the URL. Yes, even secure websites could have back-end "hole" that lets secure information out but doing the basics to ensure your connection is mostly secure is a strong first step.

Keep a Positive Bank Balance!

Almost every lender worth its weight will ask you to send them copies of your bank statements and current (month-to-date) bank transactions. Do not, under any circumstances, let your balances go into the red! If you send them a month-to-date summary and you are in the red (negative balance) they will almost always decline your request.....until you are positive. So if you think you are getting close to running into the red, ask for the money BEFORE you do. This will save you an immense amount of headache as most lenders will not even lift a finger if you are in the red (negative balance.) Important: Some lenders will ask to verifiy your bank balance on the day of funding so if you think you can outsmart them and print a bank balance BEFORE the day of funding - no so fast - they will verify your balance on the day of funding so always be sure you ask for the money BEFORE you think you will need it. That will save you days of time if you think you are going to run into the red temporarily. Remember, honesty goes a long way when borrowing from a bank or non-bank lender. Be honest!

Gather Your Documents

Some business owners consider this the best step they ever took prior to searching for funds. Using the steps below, gather as much information and documentation as possible so you will be fully prepared for just about any question that comes your way. When you are borrowing money, especially a large amount of money, you will be questioned on everything so make sure you know your business inside and out, have a very clear understanding of how to repay the funds, and have a solid plan for growth and success in the future. Know everything about your business and financial statements to avoid answering a question with "I will have to get back to you."

Gather Bank Statements - From All Banks

Regardless of which type of lender you choose (bank or non-bank) chances are they will ask you for copies of at least the prior three (3) months of bank statements PLUS the current month-to-date bank statements. Be sure the statements are clear and readable and in a format the lender requires. If the lender wants the documents in PDF form, give them the documents in PDF form. Don't try to out think the lender, just do as they ask and the process should move rapidly. Every wrinkle you introduce into the review process will slow down or stop the progress. Always talk with the lender and ask them exactly what they need and what the format to use for sending over the documents.

Prepare Your Financial Statements

If you are a brand new business then this does not apply (however, financial projections will apply.) Have at least three (3) years of complete financial statements available such as income statement, P&L, balance sheet (your CPA may call them something different but they will know the "set" of documents that you need.) Make sure there are no holes in the documents such as numbers that don't add up, missing sections, or anything that would make someone stop and ask questions. This is VERY important because holes open the door to questions and can really screw up forward progress. Be sure your documents are a 100% honest and truthful representation of your business as the bank or non-bank lender is going to look closely at those. NEVER EVER fiddle with numbers to make your business look better than it is. That is called fraud.

Know Your Credit Score.

Many business owners do not know their credit score because they have not needed to borrow money in a long time. This single issue can be make-or-break point for a bank loan application and it can save you from having too many inquiries on your credit report. Knowing your score in advance can quickly steer the bank or non-bank lender down the correct path. For example, if you have flawless credit over 800 the cost of money will likely be less than if your score is 650. Some loans will not be available to certain credit scores so just know your score before talking to a bank or non-bank lender. Hint: A non-bank is not as critical about your credit score but they will check. The difference is many non-banks will perform a "soft pull" of your credit report which does not show up on your credit report.

Review Your DUNS # and Data

This part is more important to non-bank lenders but every single business should have one. A DUNS number is a "Dun and Bradstreet number" which is kind of similar to your personal credit report but it is for your business credit. Many banks and non-bank lenders review this report to see if you have any existing UCC's (security on assets statements) or any negative borrowing history (again, similar to a credit report.) If you don't have one then please contact Dun & Bradstreet and get a number established. It costs nothing to get a number and it can play a big part in the funding approval process, especially for a non-bank.

Have Any UCC's?

A UCC (or UCC-1) is technically a lien on some or all business assets. Many companies do not even know they have a UCC because they don't read the leasing documents they signed when buying that copier or office equipment. A UCC helps the creditor secure their stake in your company assets should you default. Check with your local Corporate Records department for your state. Most have an online search tool so you can find a UCC rather quickly. If the UCC is inaccurate or old, you need to contact the company holding the UCC and have them file a release and also provide you with a written statement that the funds secured by the UCC have been repaid. A UCC can blow you completely out of the water when looking for a business loan so always check beforehand.

Time For The Journey

If you have all your information handy, made sure there are no issues in your financial statements that can cause problems, etc. then it's time to start seeking a lender. It's always wise to talk with more than one lender because, especially with non-banks, fees vary widely, special offers come-and-go, and your goal should be to find the cheapest money possible for your situation. You may not need money tomorrow so a bank may be your best option. Or you may have found yourself up against the wall and need money fast and a non-bank may be the best option. Shop around, use this search engine to find some options, and always check with your local bank to see if they have any deals going. Good luck and if you make a deal using A Funding Place as the search tool - please let us know.