How do lenders perceive your business? What is it they look for when determining your rate and term? The answer is it's NOT complicated!
Alternative Lenders have to weigh daily the benefits of charging higher rates (than banks) against the much higher risk of defaults. The fact is that Alternative lenders experience significantly higher percentages of defaults because they cater to businesses which are either un-bankable due to credit issues & restricted industries or because the capital they lend is unsecured & lacks collateral.
Most non-bank funding's are revenue factors- that is, the lender "purchases" a specified amount of your future revenues and gets paid by taking a daily or weekly payments until the payback amount is reached.
The first item a lender will look at on your bank statement is deposits, the higher the better.
Number of deposits is very important - high revenue on 5 deposits a month is not good. 15-25 deposits is considered healthy.
NSF & Returned items - How many times were you charged for a returned check or ACH? The fewer of those the better.
Revenue swings from high to low - consistent revenues aren't always possible in every business. Construction & development are especially prone to this, lenders sometime need to see a full 12 months of deposits in order to make an offer.
More on this next week....