As published in Scotsman Guide's Commercial Edition, May 2008.
Lenders in today's environment seek strong projects to secure their precious capital. As a result, it's more difficult to find funding for challenging projects.
Challenging projects often seem to have all the right pieces but lack one critical element to receive an approval. Maybe the loan doesn't service the proposed debt well, or the borrower doesn't have enough equity, or the property is too old, or the borrower doesn't have industry experience. The list goes on.
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These projects can actually be some of the most-interesting ones on which to work. They often have the best borrowers -- people who don't take your services for granted. Further, you can sometimes make the most money with these deals. If you've honed your skills and developed the right relationships so that you're the only broker who can secure funding for a particular project, you are likely to get paid commensurately. Also, it can be rewarding to get an approval for a project you never thought possible.
To obtain the sought-after approval on a difficult deal, you have to look at all the pieces of the puzzle and determine how they fit together to create the most convincing story for the loan. And you must submit a complete package. Here are some of the essential items you must present to a lending institution. If you leave out one of the following items, the deal may not get done.
Personal financial statement
This personal balance sheet will provide lenders with answers to some of these critical questions:
How much cash do the borrowers have?
Can they meet the equity requirement?
Do the borrowers still have funds available to run their business?
Are they personally overleveraged?
Do they have an adequate net worth?
These are also questions you should ask yourself when reviewing your clients' personal financial statement. If the borrowers struggle in one or more categories, you must mitigate this by presenting information to the lender about other strengths the borrowers possess.
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