What lenders are looking for in a loan Preview 04:44

In this lesson I share with you what lenders are looking for in a loan, how they get paid back through what is called "sources of repayment" and more.

Common terms and acronyms Preview 04:02

Defining some of the key acronyms and terms I will be using in this course.

How the reason you need a loan, or loan purpose, impacts your application Preview 04:02

Every loan request has a reason behind it. Lenders call this the loan purpose. i.e. What is the loan for? Your loan purpose will drive literally your entire conversation with lenders.

Understanding lender loan "appetites" Preview 05:19

Every lender has an "appetite" for certain types of loans. Make sure that lenders you approach are used to giving loans to businesses like yours.

The various phases of a loan and what you will need during each phase Preview 16:36

In this lesson I walk you through the various phases of a loan application. Including what you need to know at each phase and what documents you will have to have.

How credit scores impact your business loan application Preview 04:30

What are sources of repayment? Preview 03:04

How do banks get paid back for business loans

The three main things you need to show to get approved Preview 07:08

In this lesson, I discuss the three main things that most lenders look for in a business loan.

What is global underwriting? Preview 02:45

How do banks decide to approve business loans

What items can be added back to calculate your debt-service? Preview 02:34

How do banks calculate cash flow

Calculating debt-service coverage ratios (an example!) Preview 22:26

In this lesson, I share an example of how to calculate the DSCR on a loan.

Unsecured vs secured loans Preview 01:59

Do backs prefer secured or unsecured loans

Loan collateral Preview 11:55

How loan collateral works and how to calculate loan-to-value ratios with examples.

Your liquidity and how to calculate it Preview 08:02

In this lesson, we go over what liquidity is, why it matters, and how your lender will calculate your personal liquidity.

How do personal guarantees work? Preview 04:54

In this lesson, I talk about personal guarantees and why you will most likely be asked to sign one. Plus, we talk about the difference between full and limited guarantees.

How long are loans for? Preview 05:39

In this lesson, I talk about two main factors in determining how long your business loan will be good for. They are loans terms and loan amortization.

How lenders use loan risk grades Preview 02:50

How do lenders grade loans

How are loan rates determined? Preview 07:46

How are business loan rates determined

What is a loan floor or ceiling? Preview 01:16

Do business loans have maximum and minimum rates

Owner Occupied versus Non-owner occupied real estate loans Preview 02:41

How can I get a business loan for investment property

How do Small Business Administration (SBA) loans work? Preview 07:57

How do SBA loans work

SBA Loans through the Economic Injury Disaster Loan program Preview 22:26

The Small Business Administration (SBA) has a program called the Economic Injury Disaster Loan (EIDL) program.

During March of 2020 the U.S. government gave the SBA additional funding to distribute to small business owners impacted by the coronavirus and its impact on the economy. Those funds were to be awarded through the EIDL program.

This lesson covers the details of that program, how it works, and the forms and documents you need to submit.

What are the differences between term sheets vs commitment letters? Preview 02:55

How do lenders show they have approved my loan

Will you have to pay prepayment penalties if you pay off your loan early? Preview 02:32

Can I pay off business loans early

What are loan covenants? Preview 02:37

What restrictions do business loans have

What other costs or fees should you expect with a business loan? Preview 02:14

What are the costs for business loans

How long does it take to close a loan? Preview 05:04

So, how long does it take to get a loan these days? 

Well, even with the advances in technology that are being used to speed up the lending process, you should expect it to take longer than you want.

There is no question that certain types of small business loans take longer than others. But before we get to that, let’s talk about the various stages of the loan process. 

What to do if you are being declined Preview 02:25

I was declined for a business loan. What now

The easiest way to establish business credit Preview 07:08

Small Business Grants versus Loans Preview 05:28

Some loans act like grants. Some grants act like loans in that they have extensive application processes behind them.

The SBA just increased the maximum loan amount for its EIDL program to this... Preview 09:45

How real estate investing loans work Preview 05:31

Real estate investing loans

Lenders, by nature, are risk adverse. They like to make loans where they have a relative level of comfort that they will be paid back. So, getting real estate investing loans approved can be a challenge. Today, I want to share how real estate investing loans work and how to best go about getting approved for them.

More specifically, I want to talk about investing in rental real estate. Not real estate that you purchase for your own, or your businesses, use.

OO versus NOO

One note on that - any property where you occupy more than 50% of the square footage is considered owner-occupied. Anything less is called non-owner occupied. The key significance is the percentage of funding a lender will provide. 

For example, on owner-occupied properties lenders will often fund up to 75-80% of the value or purchase price, whichever is less. On non-owner occupied properties that percentage falls to 65-75%. On a large loan that percentage difference can mean you are coming up with some significant cash down.

The property should stand on its own

Ok, now that we have determined we are talking about NOO properties today, lets talk about what a lender is looking at when they are evaluating real estate investing loans.

You may recall that getting approved for a loan is almost always about proving the ability to repay the loan. And the primary source of repayment is cashflow. So, in the case of rental properties the lender is going to gauge the properties ability to make the loan payments without any assistance from you as a guarantor. 

Meaning, the rental income you anticipate earning, or already have in place through an existing lease, should yield a profit when compared to the loan payment and any associated expenses. 

Those other expenses will include some consideration for potential vacancies (usually 5% of annual income) and a property management company (another 5-10%) if you plan to use one. 

What is a hard money loan? Preview 03:48

When most people ask me about so-called “hard money lenders” they are more times than not looking for access to lenders that are willing to take on more risk because they believe, or know, they can’t qualify for a traditional business loan.

The thing is, that isn’t entirely what hard money lenders are all about. So, let’s take a look at what a hard money lender is and how they work.

What is a merchant cash advance? Preview 02:53

What is a merchant cash advance?

A merchant cash advance is a type of business loan where the lender extends you a loan, usually a line of credit, based on the number of sales you have coming in each month. The lender uses the income from your sales activities to recoup the payment you owe on the loan. 

This type of loan is always unsecured, meaning that you don’t have to sign over any sort of collateral like in a hard money loan. Or, do you?

What is a factoring loan? Preview 03:14

What is a factoring loan?

A factoring loan, also known as an asset-based loan, is a type of business loan where the lender is willing to provide credit based on the amount of revenue the borrower is anticipating having in the near future. 

When a business allows their clients to pay them over a period of time, otherwise known as “on terms”, they have become a lender themselves. The business makes the sale and then invoices their client requesting payment in the near future. That period of time is often 30-90 days. However, in some circumstances, the client takes their time paying the business. 

In situations like these, the business can run short on the cash needed to pay its bills such as payroll and other operating expenses. That is when a factoring loan makes sense for the business. 

Participation versus Syndication loans Preview 03:25

This lesson comes from a student request.

When a lender wants to reduce their risk associated with a loan or a group of loans they often ask other lenders to get involved. That can come in the form of a participation or syndication loan.

Guidance Lines of Credit Preview 09:23

In a previous lesson I taught you how real estate loans work. In this lesson I go into more detail about the best loan you can get as a real estate investor - a guidance line of credit.

Final word Preview 01:24

Bonus offer - my course "What investors look for in startups" FREE! Preview 00:21

About this course Preview 01:01

This lesson explains how I intend to deliver the material. In short, mostly via lecture format. However, be on the lookout for additional resources after each lesson. Particularly, sections where I lay out the key take-aways.

Also, I intentionally kept the video length for most of the lectures very short. The fact is that I could have just as intentionally rambled on to make my course seem longer, and thereby perhaps more important. But I have spent years boiling this material down to the basics and only wanted to take enough of your time needed to get you the information you need.

That's also why I have shared handouts for most lectures that reiterate the material and allow you to download them.

Lastly, since 80% of the loan approval is financially driven, make sure to spend a large part of your time on this course by using the Business Loan worksheet in Lecture 17. In fact, once you have completed this I highly recommend you save it and share with lenders you speak with.

Good luck!

Old lesson - Shotgunning deals Preview 01:57

Too many borrowers apply for business loans with any and ever lender you can find. We call this a shotgun approach. Its a mistake to apply for business loans this way. Be more targeted with your efforts.

Old lesson - Portfolios Preview 01:28

A lender's loan portfolio, and its performance, can affect their likelihood to approve your loan.

Old lesson - Unfavorable Industries Preview 01:48

What industries are easiest to get business loans for? The ones with the best historical performance.

Old lessons - Loss ratios Preview 02:31

What percentage of loans do lenders expect to lose

Quiz #1

First of three quizzes for the course. No pressure!

Old lesson - Turn-around time Preview 02:33

How long does it take to get a business loan

Old lesson - documentation needed Preview 04:25

What documents are needed to apply for a business loan?

Old lesson - Credit scores Preview 04:37

How do credit scores effect business loans

Old lesson - The Big Three Preview 04:56

The attached workbook was designed to walk you through the process of analyzing your financial position in the way a lender would, including calculating the "Big Three" for you. Just plug in the appropriate numbers in the fields and the spreadsheet will run the calculations for you.

If you run into any questions please add them in the course directly so that other students will benefit from the answer(s) as well.

The role of loan collateral Preview 02:43

What collateral do banks require

What are loan terms? Preview 01:55

How long can a business loan be for

Loan amortization and how it determines your payment amount Preview 01:27

How are business loan payments calculated

How to negotiate a better rate Preview 05:25

Small business loan rates can vary depending on a variety of factors. 

Most lenders use something called a “risk grade” to determine the rate they will offer you once approved. That risk grade often takes into account things like your debt-service coverage ratio, credit ratings (both personal and business), and other factors.

Those factors are then weighed and converted into a score (usually on a numeric scale) that the lender then uses to determine your rate. 

How to get a discount on your loan rate Preview 01:28

How can I get a loan rate discount