The arrangement of the package offered is critical today more than ever when it comes to car wash finance, just like it is with any other kind of business loan.
The apparent justification is that the more you can do to persuade an underwriter or a business development officer that you are a good risk, you are knowledgeable about the sector, and you have strong business skills.
I recently spoke with a vice president with whom I had conducted business for more than 10 years. I had done so many trades with him that I knew he’d be interested in the transaction I provided him. “Normally we’d make this transaction in a heartbeat, but we’re going to pass on it,” he stated when he phoned me back. I was genuinely shocked. He said, “Why?” He said that if banks did not timely provide yearly data, the government, in particular the OCC, would require them to reclassify loans. Even though it is a performing loan and the borrowers were never a day late, the OCC will demand them to re-classify the loan and set aside extra reserves if they fail to submit them in a timely way.
Crazy huh? This specific borrower filed four distinct tax returns and operated four different businesses. The way he kept his books left him unimpressed, and he worried that in the years to come, the necessary paperwork for compliance (financials, insurance, etc.) would be chaotic because his packaging gave the impression that he was disorganized. That it would be a performance loan didn’t worry him in the least. He feared that the loan would be financially successful. Profitability is ultimately what the banks are worried about.
The first thing to remember is to avoid leaving your audience wondering what you are attempting to communicate when you compile an executive summary of your transaction. If the project involves a purchase, include the purchase price, inventory expenses, closing charges, and working capital in the overall project cost. Then, demonstrate your investment in the transaction, its source, and any outstanding credits or seller-held seconds. Your chances are greater the less they have to consider.
The use of revenues would be added to this. In some transactions, the way the money is used is fairly obvious. As long as there is no cash out, refinancing based on rate/term or note due is usually the simplest option. As working capital and inventory are not taken into account, you are essentially just paying off a debt and covering closing fees. You must consider working capital, inventories, and closing expenses while making acquisitions. Remember to tally up all the money so the underwriter won’t be left wondering how much you actually NEED to borrow.
Make sure your documentation are up to date second. An incomplete personal financial statement that is nine months old gives the lender the impression that your loan has been inconsistent. If your finances are seriously outdated, the situation is the same.
Third, ensure that your papers are in outline style or have labels added to them (if they are PDFs or docs) so that they are organized logically and sequentially, beginning with the overview and usage of progress. To get to the point, lenders do not want to go through a mountain of paperwork.
You will hopefully be motivated to supply your information in an orderly and timely manner once you realize how crucial it is to your bank that your loan works and turns a profit for the bank.