When the Cash Runs Out - Impress a Lender

Investors over the past couple of years have been enjoying opportunity they haven’t seen in a very long time. Much of the buying has been with cash. Of course, the big players have been throwing cash at the market and still are. This doesn’t mean that those of us who are cash-challenged can’t benefit from this market. We don’t have to go hat-in-hand to lenders either. They have cash and a desire to invest just as we do. We just have to show them that we’re their opportunity to cash in on this improving market.

Have you perfected or even worked on your lender elevator pitch? There’s nothing miraculous or secret about the things a lender wants to know about you before investing in your business. You just have to present yourself and your business and cover five areas of concern for lenders:

1. Your credentials and references - this is about your personal responsibility and the way you handle your business and obligations. References from your customers and others with whom you do business go a long way toward convincing them you’re a great risk.
2. History and capability - your credit history, borrowing history for business, and repayment track record are very important. The amount of debt you’ve handled in the past and how much the lender expects that you can handle in the future will be assessed with financial ratios.
3. What’s your capital situation and involvement - how much money do you have invested in the business; how much “skin” do you have in the game? Is your company well-capitalized, as the lender wants to see that you’re in it to win?
4. Market conditions - markets change, and investment strategies need to change with them. How does your investing business fit into the current market situation? The lender wants to know that you can adapt to the market conditions as they change.
5. Collateral as well as cash flow - cash flow is the main source of repayment, but lenders also want to know that you have collateral for money they lend you. Of course, with real estate the property is normally your collateral, but all of your properties will be considered as able to be pledged.

Put together your elevator pitch and keep it current, as you never know when you’ll be in front of a lender with a great opportunity and a shortage of cash.