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FAQs for your business borrowers…

Especially with a start-up business, sometimes the business borrower does not know all the questions to ask. Pair that with a newer lender and some critical piece of the communication may be dropped.

Ten questions…

CHARLES NORRIS, President of the Plaza location of Tradition Bank, shared in a recent article in the Houston Business Journal 10 essential questions business borrowers should ask when applying for a loan. Read the entire article.

  1. What are the terms, conditions and fees associated with the transaction?
  2. How long is the amortization period and when is maturity?
  3. Is the interest rate fixed or adjustable? If adjustable, to what index is it tied and what is the frequency at which it may be adjusted?
  4. How long will it take to close the loan, and are there any delays in funding after the loan is closed?
  5. Who should be contacted if there are questions about the loan, and when would this person be available?
  6. Will a comprehensive list of documents that will be required in connection with the application process be provided? This list should include financial documents and business organizational documents, if applicable.
  7. Is an appraisal or evaluation of the collateral required? If so, is there a fee associated with the evaluation?
  8. How long will it be before an answer will be received on whether or not the application is approved?
  9. Is financial reporting required throughout the term of the loan? If so, how much financial reporting is required and how often?
  10. Most important, the creditor should be asked for advice and whether there are any other financing products or alternatives that meet the borrower’s business needs.

In writing? My variation on the questions Mr. Norris suggests…put together your own FAQ list. When my husband and I met with our lender for commercial construction loans, it was a mind-numbing process. This was not because our lender, Kathy O’Neil, was not a wonderful and interesting person. There simply was a lot of information in a short amount of time.

Creating a ‘Word’ document with FAQs would have your business borrower walking out the door with a handy reference. You can incorporate fill-in-the-blanks to make it personalized and perhaps even include a handy glossary of lending terms…something that the borrower will find helpful whether s/he borrows from you or not.

It would demonstrate your commitment to helpful information and to clear communications. And it would put something tangible and personalized in their hands that may tip the scale towards you if they are considering several lenders.

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.