If there is one certain key to success in obtaining a loan, it is that the better organized and better prepared you are, the higher your chances of success. In the Texas Commercial Lending game, nothing conveys these ideas better than having a solid, well thought out business plan.
Having goals that are achievable, projections and benchmarks is not only the hallmark of a successful business, but it is also the indicator of a business owner who takes their roll seriously and is well organized. Even if you have been in business for many years, a solid business plan is something that you can display to partners, investors and lenders.
Not all aspects of a business plan are appealing to potential lenders. As a rule of thumb, lending agencies in the Texas Commercial Lending realm care very little about projections and other unsubstantiated business future promises. What lenders care about is whether or not that are going to be getting their loan back with interest. Whether your profits are high or low matter little to lenders, as long as you are able to pay back their share.
So how do lenders use a business plan to determine whether or not you’re a high risk in being granted a loan? There are a few different indicators that will be examined and you should make sure that all of these are addressed in your business plan.
First is collateral. Banks rest easier at night when a business owner has something at risk with a loan as well. It isn’t as though the bank wants the collateral if things were to go poorly with the loan, but rather that they believe that someone seeking Texas Commercial Lending will be less likely to renege on their financial responsibilities if it is going to cost something tangible to do so. Being clear about your assets in your business plan will help a potential lender know how much they can count on you seeing through your obligations.
Another aspect is cash flow. This is not the same as projected profits, but rather how you plan to pay your bills. Proving that you have the ability to pay back your loan is more than just anticipating how much you might make in the future. Lenders really like to see balance statements, income statements and account ledgers that show a long history of sufficient cash on hand to meet your debts. Again, the lender does not really care about what your overall profit margin is. That doesn’t really apply to their Texas Commercial Lending decision. They want to know if you are going to have the capability to pay them back.
Do banks care about any future projections when it comes to Texas Commercial Lending?
Actually yes. They don’t care about what you think you might earn, but they do care about how you think you might earn it. Having a concrete and measurable marketing plan is quite important to lenders. It shows them that you know your market and have thought through how you plan on implementing your product or idea. When you think about it, this makes sense. Banks simply want to know that you have a plan and intend to follow through on it. If nothing else, Texas Commercial Lending is centered in reliability.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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