What are the Requirements of a Bank Loan and how can I obtain one through Raising Lines of Credit?
The answer to this question will be in two parts. First, the requirements of a bank loan. Second, how to obtain a bank loan via a line of credit. Before I embark on this financial odyssey, I will remind you of one big problem. Banks have tightened their lending requirements.
Unfortunately, many companies find themselves being refused loans via their banks, as they are deemed as too much of a risk or too much hassle, or not profitable enough. Banks have cut their loan books in favour of proprietary trading. This means trading for themselves in more profitable markets. The simple loan or credit line is disappearing fast.
The Requirements of a Bank Loan
There is always one stand-out requirement for a loan or credit line – security or collateral. These days you are expected to hand over any property, car, jewellery, inventories or anything with a perceived quick saleable value.
Other requirements will be business plans and the related market sector you are trading in. The bank will look at your credit history and how long you have been with them. They will run an updated credit check on all the directors and also will do a credit analysis on your company. This will show if your business plan stacks up. Most importantly it will show if you can repay the loan. All standard stuff.
But what happens if you pass all these tests and the bank still says no? Please read below under the heading “Alternative Lenders”.
How to obtain a Bank Loan via a Line of Credit?
Once you have a line of credit you can borrow money to fund your business. This usually takes the form of cash for day to day running of your business, a loan for expansion, purchase of imports or a loan for machinery purchases – it all depends on your business model.
The line of credit is awarded once you have satisfied all the banks lending requirements. Then you are laughing. Or not. Even if you satisfy all the requirements, you may well be turned down. Banks are just not lending.
Alternative Lenders
What is an alternative lender? They are institutions that are happy to lend against a certain type of collateral. If you offer a Demand Bank Guarantee as collateral, they will likely be happy to offer a credit line. Providing of course you pass standard due diligence tests or bank requirements.
What is a Demand Bank Guarantee? It is a financial instrument specifically designed as security for monetisation purposes. It contains precise wording that allows for credit lining and is governed by ICC Uniform Rules for Demand Guarantees, (URDG 758).
How do I find an Alternative Lender and where do I obtain a Demand Bank Guarantee?
There is one company that has been providing alternative lenders and Demand Bank Guarantees – IntaCapital Swiss. Over the last decade, companies whose banks will not lend to them have turned to IntaCapital Swiss.
They have an amazingly popular financial product, the Collateral Transfer Facility. Companies seeking a line of credit will be provided with a Demand Bank Guarantee. If your bankers refuse your loan application, do not despair. There are alternative lenders available through the good offices of IntaCapital Swiss.