Everyday people go to the bank with a loan request written on the back of a napkin and end up getting denied for a loan. Ever wondered why? The obvious reason is they are not qualified for the loan because of a lack of employment, insufficient income, too much debt, poor credit, no previous credit or any combination of these factors. But are these the only reasons? Maybe, maybe not. Keep in mind that bankers are on a salarythey get paid the same amount of money whether they work hard on your deal or not. You see, lenders tend to group people into categories known as A, B or C-borrowers. A-borrowers tend to be perfect people with perfect credit and high income to debt ratio. B-borrowers tend to be people who have decent income, decent credit and a decent income to debt ratio. C-borrowers, on the other hand, have marginal income and marginal to poor credit ratings. And then there are the projectslenders also tend to group projects into categories known as A, B and C-projects. Here are a few examples of how projects are ranked: A-projects are the kinds of loans the lender likes to doclass-A residential home loans from, say, $100.000.00 and up. B-projects may be a used car loanC-projects could include a debt consolidation loan for a marginal borrower. C-borrowers and projects are often quickly denied. You can see more clearly now how borrowers and projects are basically ranked in the mind of lenders. Remember; bankers are human and humans tend to take the path of least resistance. If you were a banker, would you rather do a slam-dunk million dollar loan to someone who didnt need the money or work real hard (day in and day out) trying to fund risky C-projects for marginal borrowers? Most people are not perfect borrowers and you may fall into this category. So what do you do to increase your chances of getting the loan you need? Heres a few secrets that can help get the loans you need: First, ask yourself a few questions Does your loan request make economic sense? If it doesnt make sense to you, it probably wont impress the lender. What can you do to structure the loan to make sense? Secondly, if you were a lender, would you (really) loan yourself the money considering your income, credit and project? Whether you answer yes or no, you should identify why or why not? Do you have a professional bank package or is your loan request written on the back of a napkin? By having a professional bank package you will get the attention of the lender because most people dont know how to assemble a bank package. By having a bank package, you can move yourself from a C-borrower to a B-borrower status in the mind of a lender. If you are a B-borrower you can move to A-borrower status. Why? By creating a bank package you have done your homework (and much of the work the lender needs to make a decision) in a format that professionally communicates with the lender. Heres an outline for a basic bank package for consumer (or business) loan proposals in the order shown below: 1) Cover letter (to the lender, lending institution, brief overview of package and purpose)
2) Loan summary (purpose of loan, use of funds, payback plan, economic justification, etc.)
3) Table of contents
4) Standard bank application for review (get it from the bank)
5) Statement of assets (everything you own that can be used as collateral)
6) Statement of credit debt (all outstanding debts with totals and account numbers)
7) Photo-copies last two (2) years of tax returns
8) Photo-copies last two (2) years of payroll stubs
9) Supporting documentation (borrowers resume, explain past credit problems, documents, etc.) You want to organize your bank package using an inexpensive 3-ring binder. A bank package does not guarantee financing but it can greatly improve your chances for funding tough deals. Copyright 2006 James W. Hart, IV All Rights reserved |
