Gavin Titley
VANCOUVER ISLAND – Have you ever wondered why lenders require so much documentation for commercial loans? The answer is simple: lenders need to ensure the money they lend is safe and secure. Let’s explore how these documents help determine creditworthiness and financial health.
Credit Reports: Personal and business credit reports give a quick view of your credit history. They show payment records to creditors and suppliers, where timely payments highlight reliability. Credit utilization, the ratio of credit used to available credit, shows how well you manage limits. The debt-to-income ratio compares total debt to income, offering insights into your ability to handle debt.
Rae Assailly
Financial Statements: Balance sheets, income statements, and cash flow statements give a full picture of your financial health by showing assets, liabilities, income, expenses, and cash flow. Tax returns from the past few years provide extra details about income and taxes. Profit and loss statements highlight profitability and efficiency by detailing revenues and costs. Recent bank statements confirm cash flow and liquidity, ensuring you have enough funds to meet commitments.
Asset Listings and Valuation Reports: Detailed lists of assets like property, equipment, and inventory give a clear picture of your resources. Valuation reports ensure these assets are accurately valued. Ownership documents prove legitimacy, while insurance policies show assets are protected against risks. All of this information is crucial for collateral assessment.
Business Plan: A comprehensive business plan, though not always required, serves as a roadmap to success by outlining your goals, strategies, and market analysis. It should detail daily operations and key personnel to ensure smooth functioning. Market analysis provides insights into market conditions, competition, and target customers, aiding strategic planning. Sales projections forecast future growth, helping with financial planning and decision-making.
By thoroughly evaluating all of these factors, lenders can make informed decisions that protect both the lender and the borrower. Having a deep conversation with an expert can help you better prepare for the lending process and increase your chances of securing the funding you need.
If you have any questions, please contact Gavin (250-667-3729 or gavin.titley@cccu.ca) or Rae (250-207-3905 or rae.assailly@cccu.ca). We’re here to help!
Gavin Titley, Small Business Advisor, and Rae Assailly, Business Relationship Manager, are with the Commercial team at Coastal Community Credit Union
