Getting Ready to Borrow? Do These Now!

September 23, 2020

Are you getting ready to borrow money? With continuing low interest rates, now is an ideal time to start or grow an existing business.

We at GRP Capital guide our clients from the germ of a business idea to receipt of funds.

Many clients come to us with good business plans and even sufficient equity and/or debt coverage. But many clients neglect what we call due diligence. Due diligence is really understanding and researching the elements necessary to close the loan. Due diligence also means engaging professionals who will advise and serve your interests.

How You Can Be Ready To Borrow:

Hire your own attorney:  An attorney, hired by you, can examine your purchase agreements, loan documents, and the title commitment letter and policies. A qualified attorney will protect you and your business interests and can even negotiate on your behalf. Borrowers are not always required to hire an attorney; however, we do not advise trying to save money by NOT hiring an attorney.

Ask about previous environmental reports:  Typically, when a bank loans money, they will arrange for various site visits and reports. If you are looking at buying a business or if you are refinancing, the lender will require previous environmental reports and will also engage an appraisal. If the property never had an environmental report (maybe the private lender didn’t require it), you need to be sure that nothing adverse will be revealed. Always ask owners to see their ESA (environmental site assessments). This will ensure that you know about any issues with the property. Of particular concern are nearby gas stations and automobile repair shops.

Look into title work and previous surveys: Not every property has a recent survey on file. Nowadays, most lenders are requiring updated surveys. Engaging a surveyor and obtaining the survey can take 4 weeks. Shortening the time frame comes with a surcharge. So if you are refinancing and don’t have a survey on hand, you will probably need to engage one. If you’re purchasing a business which includes real estate, as soon as you receive a letter of intent from the lender, you should consider engaging a survey, if necessary.

Meet with your accountant and get your documents in order: Let your accountant know that you are in the market for a loan. He or she will need to make sure you have up-to-date financials, which include Profit & Loss statements and Balance Sheets. Your accountant should have filed your tax returns or extensions. In addition, you will have to identify all of the components of your business debt.

Be Ready for Site Visits:

Put Your Best Foot Forward: If bank personnel or appraisers are coming to look at your business, understand your business plan and be able to explain how you will be profitable. GRP provides coaching to clients to help them understand the most important messages to relay to site visitors.

Clean House: If you are looking to refinance an existing business, the property should be in decent shape with minimal deferred maintenance, if possible. If you are planning to renovate with the proceeds of the loan, you should be able to detail what will be improved and how much it will cost.

Have a Plan for Obvious Problems: If the property is in need of obvious repairs (water damage, parking lot issues, etc.), be honest about those, be sure that you can explain the timeline and the financing of these planned improvements.

Be Ready to Borrow!

•  Clients who haven’t done their due diligence can experience frustration during the loan process. Not having a survey, an ESA or your own attorney can delay or even derail a loan closing.

• We will help guide you in the loan process. But we hope these ideas will help you before you even call us. When you have done your due diligence, you really are ready to borrow!

One of our chief responsibilities is advocating for borrowers. Even in the recent economic uncertain times, we have continued to advocate for our clients, and successfully closed loans.

Our Great Opportunities series discusses various aspects of the changing economic climate. There are still opportunities to secure funding for specific business plans. Read more about other aspects of finding funding in today’s climate here:

Becoming a Better Borrower

What Businesses do Lenders Like Now?

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