Lending Policies

Posted by | February 25, 2013 | Careers | No Comments

Commercial Bank:
The ability to repay the loan must be absolutely certain and protected in three ways: cash flow, asset coverage and side collateral. These are made up, for example, of historical cash flow that exceeds the pro-forma repayment schedule, accounts receivable substantially in excess of the value of the lo an or a guarantor willing to pledge liquid collateral in support of the loan.

Asset-Based Lender:
The ability to repay the loan must be highly probable and supported by assets — accounts receivable, inventories or plant and equipment — which in liquidation would aggregate more than the value of the loan. In addition, the asset-based lender company must be familiar with the kinds of assets used to secure the loan so that it will know to whom they might be sold in the event of liquidation .

Government-Affiliated Lender:
The loan must have a high probability of repayment, which the government believes is more likely to occur if the entrepreneur provides it with “negative incentive” assets, such as the entrepreneur’s house o r other hard assets. When this is not possible, the borrower must present overriding social benefits (e.g., jobs, exports) as a reason for granting the the guarantee. (Minorities receive special treatment in Federal programs.)

These guidelines should help you determine which type of lender to attempt to sell.

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