It is so easy to get low doc commercial loans but using its full potential to improve your business can be a frustratingly difficult process.
Here are a number of steps you can take that will help you get the best out of your commercial loan.
Get your budget ready
Before you even consider applying for a low doc commercial loan make sure that you know where to spend your money. Low-doc lenders don’t always need your most recent financials, like tax returns and bank statements. Have your budget prepared first and at your fingertips to ensure that you will use your commercial loans according to your plan.
Know your financial position
Some lenders consider the borrowers property and its true market value. They often use two types of property basis for valuation: comparison (the rate of your sales versus your property) and capitalization (the rental income of your property). Prepare a 3-year cash flow to help you get a future view of your business assets and your view on capital expenditure as well as other financial issues that could affect your repayment capacity.
Do you have a detailed asset and liability statement? It will help you understand your financial position and hence your suitability for the commercial loan you are trying to find. You can also get your credit report to get a better view of your loan obligations.
Prepare a well-designed business strategy
Commercial loans must not be used for personal purposes. Always use the loans according to your original intention. If the amount of loan is higher than your actual business needs, that’s still not efficient to use it for personal reasons. Instead, you can save that extra cash for business emergencies or for the repayment of the loan. This business strategy should be clearly structured and kept in mind when creating a budget.
Simplify your corporate structure. Make it clear, accurate and strong enough to sustain financial issues. Create up to date and accurate plans, especially when they involve major assets which produce substantial income. If your business involves rental property, create a rental schedule which details the property occupied, lease terms, payment schedules and income projections.
Assess your management skills
Remember that sometimes, a financial issue is just one of the signs of poor business management. As the business owner, you are the captain of your ship. It is important to build the right leadership. Even the best employees on hand cannot save you from losing big bucks when you make destructive business decisions. Businesses are active and flourishing if the leaders are at the helm of the game.
What is your relationship with your workers? How does it affect the job performance of your employees?
Bad management decisions can hurt the ROI and push the business into the brink of bankruptcy. Take everything into account when evaluating your management style. Try to get a feedback and maybe a suggestion box. You may be surprised with the results.