Four Reasons Your Project Won’t Get Funded

Since 2007, we have specialized in solving problems related to the finance of commercial properties and business financing such as lines of credit and receivables financing. We see the tough deals referred to us by bankers, accountants or attorneys, who have a client who needs help. Over the years, we have seen hundreds of loan submissions and talked to hundreds of bankers who have turned clients down.

Here are four road blocks to avoid.

Wrong Lender

The borrower took an acceptable deal to the wrong lenders, who, under today’s tight market conditions, cannot fund a particular deal. We are seeing this more often recently, as each lender has its own constraints. It used to be that if a deal worked for one, it would work for most. Times have changed, and they continue changing. Some banks are under FDIC pressure and have stopped lending on certain types of businesses, collateral, or geographical areas.

The banks don’t want to say no, or maybe they are not lending at the time, but in some cases the loan officers are not sure of all of the internal decisions being made on the bigger picture. Their only option after time passes is to simply turn the loan down (often with little to no feedback or options). The borrower then usually seeks somewhere else to go through the process again, often burning more valuable time and energy.
The key is to work with a professional who is keenly attuned to the right lenders for your deal. At Kingslin, we put a lot of energy into understanding this information so you don’t have to.

Wrong Presentation

Presenting a loan in a manner that does not fit with a particular lender can be equally crippling to a project. Borrowers often ask for something that can’t be done, even if it is the right project for the right lender. Asking for amounts, terms, or structures that puts them outside of the banks lending guidelines also will result in a “no”. Borrowers often do not have all of the information assembled in a concise, understandable format, and often expect the lender to do it or to “just get it”. This takes a lot of patience and time and most lenders don’t have a lot of time either.

Once the bank says no, it is hard to get them to start saying yes. Banks respond to what you are asking for. They don’t usually come back to you and say, “well we would do the deal if . . . (fill in the solution).” Banks just say no, or if they are helpful, they will direct you to a good problem solver who is experienced in navigating the process. The right problem solver can help assemble the necessary information. They will know the loan criteria for the target lender and present it in the right format.

Not Prepared

Almost everyday we get loan submissions where borrowers have ill prepared or sometimes no financials at all. Be aware that the bar has been raised! People tell me they didn’t used to have to provide this information. Well that is one of the reasons we had a meltdown in our national economy. All lenders today, including private lenders, will ask for the following at a minimum: Complete Personal Financial Statements, Cash Flow Statements, Balance Sheet and Schedules of Debts. All Analysis & Preparation of Documents plus Due Dilligence Costs fall in Borrower’s care. So, they must have a certain liquidity when they lodge the Loan Application File. No need to waste anybody’s time if you don’t.

A good Loan Broker or CPA can help you get this in order. I can’ t tell you how many times a Borrower has come into our Office dejected because they were turned down. Once we went through discovery we knew we could help them getting the professional documentation in place so their loan could be funded.

Not a Deal

Hey, the bad news is some deals don’t work. The banks are more conservative in loan to values for all types of collateral. The appraisals are tighter and more conservative. Borrowers need to come in with cash. A big hurdle for buyers (and some refi’s) is the fact that to most lenders, the purchase price is the value. Even if it is acquired through what you may consider a “discount”, that is now considered to be “market value” in many cases. Sometimes this can be overcome with an equity investor or by adding another guarantor. Again, a good Broker or private Lender may be able to help with equity or finding a stronger partner. But, you have to take care of your initial Costs.