You may not know this but, lending money is almost
as hard as borrowing it. One
of the first things I learned in my job as an
agricultural lender was figure out how you can
get repaid if the loan doesn’t work out. Lenders
often assume failure first, then consider the chance
of
success later. It should be the other way around:
consider the reasonable likelihood for success first,
then what if it
fails as a second thought.
You see, it’s easier to get fired as a lender for
making loans than it is for not making loans.
High
risk loans that default equal high risk for ongoing
employment for the loan officer. Sorry to be
so blunt about it, but lenders care about themselves
first and you second.
Here are three points all professional horsemen
should know and understand about borrowing money.
1. Be exact with the dollars needed and
specific with the intended uses for the borrowed
money. I recall many farmers who came in my
office and asked me about a loan. I’d ask, “ How
much do you need to finance the equipment?”
“Oh, about $ 50,000 to $ 100,000 dollars” was
the answer.
Can you hear the the TV game
show buzzer
for wrong answer?
If you’ve looked
at a
loan application,
the form has a short blank for a
specific loan
request. There is no “about” mentioned.
Lenders can’t deal in loose terms like around, about
or somewhere near.
2. Know your numbers. Much like
hearing the
word about, lenders become nervous
and suspecting
when the loan applicant is unsure about the numbers
of the business. They want to know specifically how
you arrived at your projected income, expenses and
net income intended to repay the loan you request.
It’s OK to have someone else assemble, prepare and
package your business numbers. However, it’s not
OK if you don’t understand the methodology of
how
they were assembled.
3. Make it easy. You may think it’s
sometimes
questionable, but lenders are human. And human
nature is to do the easy things first. They
have plenty to do and reworking your sloppy loan
application package is not a welcomed task. Your
chances for approval are always improved by coming
in with a solid, complete and well-documented loan
package. Proofread for grammatical errors, spelling
and most important, make sure the request makes
sense. Just like a tax return, the numbers have to
add up correctly. A math error signals the possibility
of other errors in the application. Faulty math in the
proposal may lead the lender to suspect flawed
business practice. Avoid giving the lender any
reason to start thinking about reasons to deny your
request.
If you aren’t strong with the finances of your horse
business, get some help. By doing so, you
demonstrate your strength in good business
practice. Business owners wear many hats and some
of the hats don’t always fit well.
There is nothing wrong with getting assistance with
your loan request to make your job of making it easy
for the lender, easier for you, too.
