Borrowing in Today’s Market

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by Brian Dineen

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11.11.2020

Borrowing for your Business requires more Planning and Patience today

Yes, it has already been said thousands of times: in the year 2020 we are in an unprecedented time from a market, social, and political perspective. I have many customers telling me, OK, Brian, we understand all that. But what does that mean for me as a borrower seeking a loan?

There are numerous uncertainties in today’s lending market, for both borrowers and lenders. My objective here is not to regurgitate all those factors, but to discuss how they are affecting the lending market. First, lenders are more diligent managing their portfolios and determining which loans they approve. That means submission requirements for borrowers are more involved than they were a year ago. More details about business operations, financial controls and planning, marketing, and contingency plans.

Lenders want to know how you are going to pay them back, which has always been the case. Now, however, they also want to know that you can pivot quickly if necessary – in the event the worst possible case comes about; they expect you, the borrower, to participate in risk mitigation for them. This means they will dig further into your operation and planning processes during the underwriting process, to insure you have covered every foreseeable condition that can occur during the term of the loan.

What does this mean for you as a borrower?

You need to thoroughly think through your business history and future. Can you explain why certain changes, both positive and negative, occurred during your previous years in business? What adjustments did you make to correct or exploit the affect of those changes? How has that influenced your plans moving forward? How will those plans and any contingencies help your business stay healthy (and able to meet your loan obligation)? What is the worst-case scenario possible for you? Best case?

There will be more documentation and proof required to answer these questions. This will add significant time to the underwriting process. Your best approach is to have everything ready BEFORE you approach a lender, then be sure you planned patience during the process. Loans that normally took 30 days to complete now take significantly longer. You need to know you have set aside a longer period for the process to finalize, so you’re not put off schedule because your capital is short of where you need it to be.

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About the Author

Brian Dineen

Brian Dineen is the owner of Trinity Capital Partners. Mr. Dineen has experience in all facets of the commercial lending industry. His expertise includes credit evaluation, underwriting, collateral valuation, lease structuring, loan packaging, and loan/lease closing.

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