How to Apply for a Loan

Better Living LLC 

Although the funding planned for Better Living LLC will come from the business owner, Jeff as well as the monthly profits from rental properties, the business also seeks to utilize the small business loan from Great Lakes Women’s Business Council, which was previously known as Center for Empowerment and Economic Development (CEED). The organization’s load application form can be obtained online. During the application process, Jeff discovers weaknesses that he can exploit to ensure that the organization guarantees him the loan. Better Living LLC has available collateral, the rental properties as one of the highlights for the company’s financial potentials. However, Jeff understands that every small business must undergo credit evaluation and approval process to be qualified for loan. Moreover, the process also verifies whether a business is capable of paying the loan on time. Obviously, Jeff also knows that Better Living LLC has weaknesses that can lead to CEED not approving his loan application; therefore, he has to convince the lender that his company is credit-worthy and can repay the loan on time. 

One major weaknesses for Better Living LLC discovered during the application process is the business’ financial standing. In the application form, CEED is demanding for Better Living LLC’s interim business financial statements‐less than 90 days old, which Jeff does not have. Since CEED normally evaluates a business financial potential by analyzing cash flow statements, balance sheet, market conditions, and debt structure to determine whether it is credit-worthy. Fortunately, CEED also evaluates the business owner’s bank statements, which Jeff can obtain from his bank. Jeff can prove his credit worthiness since his bank statement can reveal a history of his trustworthiness, moral character, as well as his expected income demonstrate his ability to pay. Through his personal bank statements, CEED will know that Jeff is a frequent borrower, thus has established a reputation of repaying his loan. Notably, this will directly have an impact on Better Living LLC’s ability to secure debt at advantageous terms. 

Another weakness discovered during the loan application is the aspect that CEED might accept Better Living LLC’s loan application due to social and community considerations. Better Living LLC is planning to offer benchmarked rental units and services within the community it operates. As such, CEED would want to participate in such a project, as it will have a positive impact to the local community. Since Better Living LLC is a new business venture, Jeff can show the lender that he has been successful in managing a similar business in another field. Before planning to start Better Living LLC, Jeff was a manager at a local real estate company where he was able to generate more profits and attract new clients. Jeff has also managed a similar real estate business that concentrated on buying and selling of houses and homes. It is true that the lending officers at CEED might be more agreeable to Jeff’s loan application if he shows them that he has experience similar to that of an individual already established in the industry. Furthermore, Jeff can show the lending officers Better Living LLC’s two years of financial projections, which will show that he will be able to repay the loan. 

The lending officers at CEED will also analyze Better Living LLC’s debt income ratio. As such, Jeff can calculate this ratio by diving the total monthly obligations of his firm by the total monthly income generated by the company. Better Living LLC’s monthly obligations include down payment for the properties, closing costs, home inspections, landscaping, updating property, and other upfront costs. Currently, Better Living LLC has a net income of $800 per month from its two houses, which Jeff saves to pay for improvements, repairs, and mortgage repayment. Jeff should ensure that this ratio does not exceed 36 since, the lower the ratio, the better his chances of getting the loan. When a business’ debt to income ratio is high, there is a high likelihood of forfeiting payment. Therefore, the management at Better Living LLC should ensure that they pay their debts in order to lower this ratio. 

References 

Carbajo, M. (2018). What Do Lenders Look For in a Creditworthy Business? Key factors that impact a business owner's ability to secure funding. The Balance Small Business. Retrieved from https://www.thebalancesmb.com/what-do-lenders-look-for-in-a-creditworthy-business-4067023 

Beesley , C. (2010). Business Loans – What Lenders Look for and Tips for Winning Them Over. U.S Small Business Administration. Retrieved from https://www.sba.gov/blogs/business-loans-what-lenders-look-and-tips-winning-them-over 

Nichols , T. (2013). Small-business loan request guide. New York: Xlibris Corporation