Understand the Small Business Loan Process




Many borrower wants to have fast and easy approval process in obtaining loan for their small business. Most often the business is the borrower life time story. In order for the lender to understand and be comfortable to lend, the process can not take minutes. It requires interview, research and documentation to prove the case. 


According to the US government, the Small Business Definition is board. The business is under the revenue of $35.5 million in sales and below 1,500 employees. Essencap has help originate 100 million in the last 5 year specifically in the SBA lending. We have help in creating an easy and smooth process. Here are how we do it with the below 5 steps.





1) Tax returns


The process typically starts with the borrower submits 3 years personal and business tax return. This is easily obtain by their CPA. As soon as our client offer authorization to their CPA, the CPA can work directly with Essencap. We do get challenges from the borrower in obtaining personal tax return when the goal is lending to the business. For many business owners their only source of income are coming form the business. If business owner has personal debt such as mortgage, car loan and other personal debt such as credit card debt. Lender musts making sure the total income can support the total debt.  This is why Essencap can help. The Net Operating Income is not the bottomline. The tax return usually has non-cash flow expense such as depreciation. The line item can be benefit to the loan calculation. Essencap has the expertise in compute the true cash flow the business is generating.     





2) Personal financial statement


A personal financial statement is a document outlining an individual's financial position at a given point in time. A personal financial statement will typically include general information about the individual, such as name and address, along with a breakdown of total assets and liabilities. Essencap can turn a long process into an easy 15 minute phone conversation with the borrower.


3) Credit report


The credit report lists what types of credit you use, the length of time the accounts have been open, and whether you've paid your bills on time. It tells lenders how much credit you've used and whether you're seeking new sources of credit. This is a quick 3 minute exercise by the borrower signing off on authorization and Essencap can pull the information from the credit agencies. 


4) Debt statement

Most recent debt statement is any amount of money one party, known as the debtor, borrows from another party, or the creditor. Individuals and companies borrow money because they usually don't have the capital they need to fund their purchases or operations on their own. All of debt information is reconcile back to the tax return, credit report and personal statement. This is a quick 15 minute exercise, where the borrower gathers all the statement from their current debtor. 


5) Uses of funds request


Understand the Uses of Funds is the explanation for lender of the money needed for various purposes for business startup, including beginning quantities of supplies, equipment, and furniture needed the purchase of building and land or costs of deposits for rent, and other startup costs. If your business is considering expansion, the "uses" part of the statement would show the build-out or improvements you will need, and additional capital assets you will need to buy. Essencap is an expert in provide guidance on deal structure. We offer advise to the borrower on the best way to explain and structure the loan. 


With these 5 steps, we can complete the underwriting and understand your financial position with in a few days. 


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