21 Apr How Today’s Small Business Lenders Make Decisions

Are you creditworthy? It depends on who you ask. Because no two lenders determine creditworthiness alike, it’s no wonder why you can be approved by one lender, rejected by another, and be offered totally different terms.

As a result of improvements in innovation and technology, lenders are gaining a holistic view of a potential borrower’s business. These advancements have also allowed lenders to cut down required paperwork and increase the speed at which they arrive at credit decisions.

Leading these innovations are online lenders. Instead of basing creditworthiness on a few metrics, they’re focusing on data points with greater context.  For example, lenders have become especially more interested in how revenue is generated, how the loan will help generate more revenue, what the personal credit of the applicant

reflects, and whether the business is capable of repaying on time.

Regardless of emphasis, at the core of making credit decisions, most lenders, to an extent, are still guided by the 5 C’s Credit: Collateral, Capital, Capacity, Conditions, and Character.

To assess a business on these merits (and provide pre-approval offers) lenders need only review basic financial documents such as bank statements, tax returns and credit reports. Bank statements, for example, can serve as window into the cash flow of a business at a given time. Personal tax returns (especially from each guarantor) can help a lender determine sources of income. Combined with a credit report, these documents say a lot about an applicant’s capacity and character with a little documentation. However, less paperwork doesn’t mean less diligence—lenders are working smarter not harder.

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Use Quote 2 Fund’s FREE, no credit check, quote generator tool to compare your financing options within a nationwide network of banks and lenders.