Lending to Your Industry

You have the great idea to move your business to that next level however; the idea did not arrive fully funded. As such, you are assembling the material you will need to go shopping for a loan. As you debate whether including pictures of last year’s vacation to the Cayman Islands into your application packet will improve your prospects or hinder them, it occurs to you that really have no clue what loan underwriters look at when it comes to making a decision on your loan.

Going through the loan process can be an arduous and time-consuming ordeal, so it behooves the would-be applicant to understand what criteria are used in determining a loan’s prospects for success. Generally speaking, as a starting point underwriters will be looking at the general health of the industry that the loan would be targeting.

Industry Specific Focuses

When underwriters look at an application, they do so with a myriad of questions, requirements, and criteria. First and foremost, any lender wants to guarantee that they are going to be paid back the loaned money and each of their inquiries is conducted with that fact in mind.

Mark Twain once famously noted, “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”

If you’re seeking an expansion loan in an industry that is not performing at optimum performance, relative to other investment opportunities, then you may well feel the same way as the frustrated 19th-century humorist above.

To better assess your chances of obtaining a loan against a crowded field of other applicants, the Small Business Administration has recently compiled their loan performance report. The study looks at every business category along with their history of SBA loan failures and defaults.

Marinas Float Underwriter’s Boats

Receiving high marks from the SBA were marinas, which performed extremely well when looking at historic rates of successful loan paybacks, particularly compared to other special purpose property types like hotels, car washes, restaurants, and gas stations. A special purpose property is one that can’t be readily changed to any other purpose.

As such, when you’re looking to expand your business, it makes sense to determine if the industry that you are looking to expand in is operating in a loan-friendly environment and which lender would be willing to lend to your industry.