Applying for equipment financing or a working capital loan shouldn’t be like going on a blind date where you just tell the other person your best and skip the not-so-stellar parts. The analogy for the application process should be more like running for public office where everything that is hidden in those closets comes out. It makes sense to leave all your cards on the table because a late discovery of a tax lien or default, even if it was many years ago, can ruin your chances of approval. It may also decrease your chances of working with that financial broker again.
So you don’t waste your time and that of your lender, reveal all the negatives early on when applying for business financing. Include detailed explanations of those events when possible; A medical issue or the move of a key customer can be valid reasons for a financial downfall in your business and can sometimes be overcome by getting approved. If you have documentation; letters, statements, etc. to back up your explanations, which will strengthen your chances of making a clear case for the negative things that happened. At least you will show effort and develop the “character” part of your application that many applicants underestimate. Remember, this is a people business and perception still adds to the equation.
In cases where the negatives are so important that they cannot be resolved, it is better to know sooner rather than later to save you time and effort and be able to start plan “B”. There is always a “B” plan … that includes the use of higher risk lenders who specialize in approving clients with mild to severe credit problems. If an offer from a higher risk lender is not acceptable, you still have the option to decline it at no expense on your part other than time and effort.
In business, as in most other areas of life, the goal is to get a positive result quickly and efficiently. The sooner you know if your team’s acquisition or expansion can be approved, the faster you can move on to other strategies for your business success. We know that the problem for many companies is going through the paperwork process which, for the most part, cannot be avoided, but if you share the problems you have had in the past, many financial agents can preview your profile without take out credit or require a complete financial package before you have a good idea if you can be approved or not. That way, if you have to review the paper, you know it’s headed for likely approval.