Yes, you are being watched!
Every decision you make has an
impact. Small business lenders (alternative and conventional lenders)
will always review your past. After all, history is usually a good
indication of future results….at least that’s what we have learned. The vast
majority of us use technology and social media, which means we leave a blueprint of
activity.
John of ABC Company has worked
hard all his life. He has poured his entire life savings into his business. John has not taken a vacation in 15 years and has been driving a 2001 Honda Accord
since he purchased it new. He has a new granddaughter who he hasn’t met living across the country in Bel Aire, CA and his wife has been pressuring for him to go visit. So what does John do? He applies for an
advance, gets approved for $45,000 and
decides to pay himself, take the much needed vacation to see his granddaughter,
and buy a new car! After all, this is the first time he’s able to pay
himself more than the critical living expenses.
Why not? He’s earned
it…..Wrong!
He transfers $20,000 to his
personal account, pays for the new car by putting down $10,000 and then pays
off his personal credit cards using his business account. He and his wife
fly first class across the country, surprise their daughter and son-in-law by
making a grand entrance in a Towne Car, pay for a spa to treat their daughter,
and buy all sorts of “goodies” for their granddaughter.
All is documented:
- The
transfer from the business account to personal
- The
down payment for a new car
- The
payments to his credit cards using the business account
- The
selfie while relaxing in “first class” in Instagram
- The
video clip when they surprise their daughter and her family in Snapchat
- The
trip to the toy store to make purchases for their granddaughter…(all caught
on camera)
- And
to top it off, the story in Facebook thanking XYZ lender for making this
trip a reality
A few days later, John gets back home and decides to apply for a
line of credit with a local hedge fund. His business appears to be in
good standing…healthy balance, no NSFs for a month, some new marketing, an
upgraded sign to enter his store. John gets a pre-approval and is now
ready for due diligence. John decides to take
another advance ahead of
his line of credit. He pays a due diligence fee of $5,000. He’s finally
made it!
Wrong again!!!
After a review of his financials
and background, John is grilled with questions like why he spends funds that are meant for
running his business. His answer? He looked at the aforementioned advance as the first time he had taken home a real
paycheck.
REALITY: His business
management comes into serious question as he has been unable to pay himself
for 15 years, had spent all the funds he just received a month earlier on
non-business expenses, and had no break-through projects coming up. John
is ultimately denied a line of credit.
Two weeks later, he takes on
another advance to help make the payments on his two previous advances. He
looks for more ways
to get a loan, but it’s now virtually impossible since he
is over-leveraged and riddled with too much short-term debt.
Sound familiar? Don’t get
caught in this cycle. Hire a professional
to review your business, make
recommendations, and provide options and solutions to make you bankable.
If you would like to reach out to us,
call
315-314-2234 or
315-314-2426 or get a free consultation
HERE.
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take an informal look at
how you
would qualify for a loan?
