I’m sure you’ve wondered what the bank does when an application is submitted for review. Generally speaking, they’re considering whether or not your application demonstrates credit worthiness – in other words, can you honour your debt obligations now and in the future?
A credit application will only be approved if the lender is confident in your credit worthiness, as well as your ability to service the loan and the collateral that you’ve offered as security.
How do I know if my business is credit-worthy?
We know you’re not a mind reader, but knowing what a lender is thinking will definitely put you on the right track!
There are some key questions that a lender will consider when reviewing your application:
- How do I determine the credit worthiness of this applicant? Have they given me enough information to make a decision?
- Can the borrower manage the proposed debt in addition to their existing business operations and any other debts?
- Has the proposed loan been structured correctly, and is the product right for the purpose?
- Is the proposed security (collateral) suitable for the loan? Are there any guarantors involved?
- Are there primary and secondary sources available to repay the proposed loan?
- Will any proposed loan covenants restrict the business from growing?
It’s important to consider these questions when putting together your Lending Proposal. This will ensure that you’ve given the lender all the information they need, and have demonstrated your credit worthiness in a clear and structured way.