Navigating The Lending Maze

The time has come to either start a business or expand an existing business. If you are like most individuals you will need funds to do so. One such means to start or expand a business is through borrowing money. Even the largest of companies need to borrow money to begin operations or expand their current operations. The only difference between them and you is their experience in navigating the loan process. Most if not all of us have seen a child’s maze. The one’s where there is a beginning and an end with numerous dead-ends in between and the child needs to locate the most effective and efficient route to locate the exit of the maze. At times the child gets frustrated and quits; other times he or she loses valuable time in locating the exit. That visual description is exactly like the lending experience. The lending process has always been a maze and after the recession of 2008, 2009 and beyond the maze has become increasingly difficult to navigate. The government has added additional regulations for the banks to comply with, subsequently causing the banks to tighten their due diligence process and loan standards. All of which have added turn-offs in the loan maze for the borrower to work through. If the turn-offs do not prevent you from obtaining a loan altogether, they will at the very least delay the process. The most effective way to prevent either one from happening is through careful preparation. Diligent preparation will minimize the chances of either one from happening. Business owners know their business inside and out until they become experts in their field. Whether one is in the retail business, the restaurant business, the hotel business or any of the other businesses that make-up this economy, very few business owners borrow money on a regular basis. Between each loan the lending process changes as everything has changed, leaving the business owner somewhat naïve and confused over the most recent process. Coming from an entrepreneurial family I remember my father telling me in the 1950’s if his cash flow was too weak to cover payroll, he could walk into the bank, speak to the manager, or maybe the owner at the time. (Back in the 1950’s banks were frequently owned by other local business owners.) The manager would walk over to the tellers, have them advance my father the money, telling him to return on Monday to sign the paperwork. A bank manager couldn’t do that today if he or she wanted to. That was the 1950’s, which is over 60 years ago. As with everything, business has evolved. Even compared to the economic robust early 2000’s the lending environment has drastically changed. The most effective way for a business owner to participate in the lending marketplace and obtain the desired outcome is to thoroughly understand it and thoroughly prepare for it..