6 Criteria To Analyze Business Loan Proposals
You own a business and for whatever reason, you’re unable to secure traditional bank financing. You’ve been referred to some alternative lenders and you have proposals from three of them. How do you decide which proposal to accept? Your initial reaction is probably to go with the lender offering the lowest price but that’s not always the best deal. If the cost of funds from a particular lender is significantly lower than the others, it pays to find out why before signing the proposal and going to audit. The following are a few things to keep in mind when evaluating proposals:
Make sure each lender has:
- Evaluated a complete financial package
- Used the same assumptions in arriving at its pricing structure
- Come up with a realistic view of your business’ situation
- Offered the right amount of financing for the situation
- Structured the transaction to really meet the needs of the business
- Explained any restrictions or covenants placed on the loan as well as any fee or rate increases that could be assessed down the line
Using these criteria, you know you’re comparing apples to apples. Be aware that a much lower pricing structure can also equate to lower levels of customer service as the lender has less incentive to go above and beyond the bare minimum for you. That means don’t expect the lender to provide an over-advance or side loan if the business needs it or to help you through any new difficulties your business may face.
A thorough evaluation and careful consideration of all proposals using the exact same criteria will lead you to select the right lender for your business.
About Celtic Capital
Companies looking for working capital to cover operating expenses, fund growth, increase buying power and take advantage of vendor discounts and rebates turn to Celtic Capital. With an appetite for the more complex transactions, Celtic Capital has a history of success in crafting creative, flexible asset based financing solutions from $500,000 to $5 million with no financial covenants.
As an independent lender, working with companies nationwide, Celtic Capital is willing and able to alter price and deal structure and expand lines of credit to handle its clients’ increased revenues; and when cash flow is an issue, will look toward providing an inventory facility to help offset lost cash flow.