2-16-06
As a loan officer at a bank, I have seen almost all a customer has to offer.
In this blog, I am going to share some ideas on what we look for when a customer comes in looking for a loan.
Also, I will give out some information on what to look for if you are looking to buy a business or investment real estate.
When a customer enters my office and informs me that he would like to borrow money, the first thing I do is find out what and why he is wanting to borrow.
After this is completed, I get some information on the customer’s finances and credit. Depending on the size of the loan, I also verify income. The person’s credit and financial statement tell a lot about a person and whether they have a good chance at getting the loan.
The next step is to do a cash flow to determine if the borrower can pay for the loan without getting it in financial difficulty. Everybody wants the loan when they request it, but sometimes loan officers can actually do the customer a favor by turning down the loan.
On a consumer loan, the person’s debt-to-income should generally not exceed 38 percent of payments divided by gross income.
If everything has looked good so far, next it is time to evaluate the collateral to try and determine the value.
Sometime during this process, we will discuss terms and conditions of the loan. The more sophisticated the borrower is, the quicker this will take place in the application. Whenever I am borrowing money, the first thing I want to know is the interest rate.
It always amazes me when I do a loan for a customer and they never inquire about the interest rate. Part of that is the trust they have in me knowing that I won’t sting them like some bankers would.
Another thing that surprises me is how unprepared most customers are when they come in to see a loan officer. You will have a better chance of getting a loan by being prepared with current financials and income information.
If you decide to take the loan, check out the fees and rate prior to signing the loan papers. NEVER take credit life or gap insurance. We sell credit life to customers who want it, but the insurance is costly and not as good as traditional insurance such as term and whole life.
Also, if you do not like the terms or conditions, go somewhere else. Banks are wanting to loan money to good customers and everybody does things differently.
Now, I would like to share some information on what to look for when you are looking into buying a business or investment property.
It is best to get the seller’s last two tax returns (three is even better). You should also get a year to date profit and loss statement. On the tax return, look at the net income from the tax return.
Everybody always says they make more than what the tax return says, but you should concentrate on the tax returns unless they can show you something otherwise. The loan officers will usually not give any credit to sellers who don’t show income that is not reported.
After this, you can add the interest and depreciation back to the net income. Take this figure and do a ratio to determine the cash flow. The more prepared you are and the due diligence you do, the better chance you have of succeeding with or in the business or investment.
Hopefully this has given you some useful information
In this blog, I am going to share some ideas on what we look for when a customer comes in looking for a loan.
Also, I will give out some information on what to look for if you are looking to buy a business or investment real estate.
When a customer enters my office and informs me that he would like to borrow money, the first thing I do is find out what and why he is wanting to borrow.
After this is completed, I get some information on the customer’s finances and credit. Depending on the size of the loan, I also verify income. The person’s credit and financial statement tell a lot about a person and whether they have a good chance at getting the loan.
The next step is to do a cash flow to determine if the borrower can pay for the loan without getting it in financial difficulty. Everybody wants the loan when they request it, but sometimes loan officers can actually do the customer a favor by turning down the loan.
On a consumer loan, the person’s debt-to-income should generally not exceed 38 percent of payments divided by gross income.
If everything has looked good so far, next it is time to evaluate the collateral to try and determine the value.
Sometime during this process, we will discuss terms and conditions of the loan. The more sophisticated the borrower is, the quicker this will take place in the application. Whenever I am borrowing money, the first thing I want to know is the interest rate.
It always amazes me when I do a loan for a customer and they never inquire about the interest rate. Part of that is the trust they have in me knowing that I won’t sting them like some bankers would.
Another thing that surprises me is how unprepared most customers are when they come in to see a loan officer. You will have a better chance of getting a loan by being prepared with current financials and income information.
If you decide to take the loan, check out the fees and rate prior to signing the loan papers. NEVER take credit life or gap insurance. We sell credit life to customers who want it, but the insurance is costly and not as good as traditional insurance such as term and whole life.
Also, if you do not like the terms or conditions, go somewhere else. Banks are wanting to loan money to good customers and everybody does things differently.
Now, I would like to share some information on what to look for when you are looking into buying a business or investment property.
It is best to get the seller’s last two tax returns (three is even better). You should also get a year to date profit and loss statement. On the tax return, look at the net income from the tax return.
Everybody always says they make more than what the tax return says, but you should concentrate on the tax returns unless they can show you something otherwise. The loan officers will usually not give any credit to sellers who don’t show income that is not reported.
After this, you can add the interest and depreciation back to the net income. Take this figure and do a ratio to determine the cash flow. The more prepared you are and the due diligence you do, the better chance you have of succeeding with or in the business or investment.
Hopefully this has given you some useful information
posted by Craig Hall | 6:04 AM
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