How Your Loan Request Will Be Reviewed

Most commercial lenders will have a group of officers that review every loan request, and evaluate the proposal based upon a point system or recommendations.

Business Loan Evaluations

The loan evaluation procedures determine if a business is a positive or negative risk. While there is no guarantee that a business will not fail, the review process creates an impartial system to show the lender if the risk is worth it.

The loan request review looks at the following criteria:

  • credit history of all partners or principals
  • cash flow history and projections for the business
  • personal characteristics of the individuals involved - This includes prior business experience, past credit relationships, and the level of preparation put into the business plan.
  • business and personal financial statements - This shows the amount of working cash and capital a company will have, any debt, inventory, how often the inventory is turned over and the receivables, profit margins, and overhead. If a business is new, then this information is all projected in detail.
  • the detail of the amount being asked for - This amount should be exact, and the business plan should explain to the commercial loan lender how the amount was determined. The lender will be looking for a very detailed explanation of how this amount was arrived at.
  • the loan request will include the collateral or guarantees by the principals - The commercial loan lenders will be looking very closely in the review how the money will be repaid, and the terms necessary for it. Collateral comes from inventory, equipment, securities, or any personal assets the principals will offer.

Loan Request Approvals

Banks and business loan centers are required to keep all information confidential. The review process can take time depending on the complexity of the loan proposal and the number of principals involved. Once all of the necessary background work has been completed, the loan review committee or board will look at the combined elements and decide if they should approve or reject the request.

The loan will be approved on the basis that it will bring success to the business, and be a successful risk for the lender. Lending institutions want to lend money to businesses within a community to build trust and assets. However, not all loans are approved, and a business owner should continue to pursue various institutions to seek that approval as not all commercial lenders base approval from the same criteria or methods.