The premise of acquiring a loan is simple, regardless of how convoluted lenders try to make it. It all boils down to four (4) categories of borrowers:
- Asset Based Borrower: This borrower has sufficient assets i.e. stocks, bonds, real estate, equipment, etc. with values that exceed the desired loan amount. This greatly reduces risk for lenders. These borrowers receive the best interest rates, higher loan amounts/borrowing authority, etc.
- Human Effort: This borrower has proven their earnings potential and, as a result, this provides the lender with a level of comfort that the borrower can earn enough capital to repay debt i.e. cash-flow, profits, etc.
- Assisted Borrower: This borrower has someone willing to pledge assets or personal reputation to provide consideration for the lender to make the loan i.e. SBA loans, co-borrowers, co-signors, additional guarantor, etc.
- Knowledge Borrower: This borrower does not have assets or assistance, but they have human effort, vision and a plan. This borrower has written out methodically their strengths, weaknesses, opportunities and threats. They know how and who they will sell their goods and services to (Marketing Plan). They know their pricing and how it relates to their market and competition, their Unique Selling Proposition (USP). How much they need, for how long and how they will repay it (Financial Projections). Simply put they have a business plan that clearly demonstrates their ability and purpose to repay. This provides the lender with an in-depth understanding and insight that, despite the lack of security, they have firm industry knowledge of weaknesses and will provide a solution.
Which type of borrower are you?
Based on which type of borrower you are, this should help you understand lender risk tolerance and what source of capital is best for you.
Pre-qualify now by submitting some basic information online about your business.
Author: André Wilson, Managing Partner #mnymn #bnker
As a Capital Expert, Mr. Wilson and his team structure and secure funding nationwide and internationally for businesses, allowing management to focus on their business. Searching for money is a full time job! Our fees are primarily based on success, so if we don’t secure you a loan we don’t get paid. If you have a capital need reach out and let the experts solve that problem while you continue to be the expert at what you do.