You could argue that serviceability (your ability to repay the loan) is the most important condition that a lender will consider.
Lenders will conduct a repayment analysis to identify whether or not you have the capacity to service the loan. They will want to identify the available sources of repayment, as well as the viability and importance of each.
There are some key questions that a lender will consider when conducting a repayment analysis:
- Is the supplied financial information current? How responsive has the applicant been to requests for more information?
- Does the applicant have an MIS system? (= How well do they know their business?)
- What is the primary exit strategy? Can we determine a link that ties repayment of any proposed debt to operational cash flow?
- What is the secondary exit strategy? Will the liquidation of security be sufficient to cover the proposed debt if the primary repayment source is not available?
- What (if any) is the tertiary exit strategy? Will recourse to guarantors (if there are any) further strengthen the lending case?
If you have provided structured, detailed documentation as part of your Lending Proposal, then these questions will be easily answered by the lender – helping to speed the process up and (hopefully!) achieving loan approval much quicker.