You may want to expand or acquire another practice; purchase new or innovative equipment to remain competitive; renovate, buy, or construct commercial real estate; buy-out a partner; or simply need working capital on hand to manage the day-to-day business or have on hand in case of an emergency. Whatever your needs are, it’s important to know the factors that go into being considered for a loan.
Often, lenders look for certain qualities in a borrower that can tell them a lot about their ability to repay a loan, and first impressions can really make a difference. Business history, business background, and familiarity with your industry all play a key role in the approval of your application.
Perhaps the most important factor lenders consider when deciding to approve a loan is the company’s capacity to repay it. By comparing your history of debt repayments as well as the current debt you might be carrying, lenders will determine your ability to make payments on a regular basis.
When attempting to secure a loan, you will often be required to put up capital. Seeking out a loan when you must pay capital may seem counterintuitive, but lenders often want borrowers to have money invested in the loan as well. Doing this makes it more likely that you’ll pay it back. Since lenders are taking a risk by loaning out money, they want to ensure the borrower is also assuming a portion of the risk as well, which helps in the success of the loan for both parties.
This is a little different from capital, though it works in the same vein. When a borrower puts up an asset, such as real estate, the lender understands you’re serious about repaying the loan.
Lenders are often interested in what your plans are for using the money. Is it a capital injection to keep the company afloat or is it a reinvestment to expand your current operations? Chances are that lenders will be more likely to approve the latter since it shows more potential for repayment if your business is growing. However, all loan applications are different and each one either lives or dies for a variety of reasons. The local or national economy, the financial health of the borrower’s industry and any business competitions are other conditional factors that play a role.
Lenders all have different thresholds for what constitutes appropriate credit. Some want borrowers to have exemplary credit, while others are much more flexible in this aspect.
Now that you’ve learned about the 6 C’s that are taken into consideration when applying for a loan, it’s time to determine your healthcare practice’s vital needs to ensure its smooth operation so that you can spend more time caring for your patients!