A Few New Strategies for Borrowing

When a laundry operator wants to expand his or her coin or card operated business, they will usually need to borrow the money required from either an individual friend, family member or financial institution. With individuals, or a relative (usually good old uncle John), they just have to believe in you. With a bank, or other financial institution, you must be able to prove you can pay it back as agreed, and the proof that you can has to be given to them well in advance of their passing out the money. That usually requires presenting two or three years of personal and business tax returns and the production of current financial statements proving you will have the capability of repaying the loan. One suburban laundry owner planned to really expand by buying out a small chain of nearby laundries. He needed to borrow the required funds as the chain was available for cash only. So he created honest statements to show the bank. Because he was a bit uncertain of the process, he wrote up a brief business plan and submitted it all to the bank. He was turned down, and rather abruptly. It really hurt his dreams of expansion. A few months later he was relating his tale of woe to a group of guys who were at a neighborhood party. In the group was a rather pleasant new fellow, who it turns out was a loan officer of a large bank in the nearby city. ''What you did,'' he said ''was tell them the truth, and that might have damaged your application. Loan officers tend to believe that most applicants inflate their personal financial statement and so automatically discount them twenty to thirty percent. In your case they probably took the real facts you presented, discounted every thing by their usual percentage and turned down your application.'' According to his friend, a loan officer doesn''t usually have to explain to his superiors why a loan was refused. It''s the loan they approve that may have to be justified later, especially if there are problems with it being repaid on time. Most banks and other lenders pay their people on salary, not commission. Therefore, your loan officer can be looking at it as doing something of a personal favor for you just by making the loan. Of course, good loan officers want to make loans, it makes them look, to their bosses, like they are hard working and being diligent. But there is an old adage that often applies, ''The best way to borrow money is to first prove you really don''t need it.'' Even though bank or other financial institution loan forms tell people that it is a crime to over state assets, most people need to do that in order to gain the loan officer''s respect, and thus get to borrow the money they need for business. And it can all be done without the would be borrower ever breaking the law. Who is it that decides what the value of your home would be if you place it on the market today? This is one of the things that will really impact your ability to borrow funds. But you the owner set the asking price, and you should not be bashful about setting a high value on it. This can be tough to do if you just bought the house, however if you''ve owned the place for a few years, set the value at whatever you''d be willing to sell it for today. Be optimistic, very optimistic. Remember, the loan officer will probably be discounting it anyway. Who is it that places the value on all of the furniture or art collectibles in your house? Who even knows what is in your house? You are the one, and only one who can do it. Don''t overlook the various things you have accumulated over the years. One laundry operator''s home was burgled and his TV and a few pieces of costume jewelry were taken. The big collection of limited edition plates that were hanging on the wall were not touched. His mother had passed them on to him, and his wife liked the way they looked hanging on the wall. Because of the theft, he decided to have someone come in to his home and appraise the value of all of his household items. It turns out that the limited edition plates were worth nearly $50,000. He had never before included them or anything else, other than the basic value of his home in financials given the bank. Who is it that can best set a reasonable sales price value on your coin or card laundry business? You can do it because you know it. Just because you bought the laundry for $200,000, a few years ago, doesn''t mean it''s worth only that much today. It should now be worth more because of all of the many improvements you have made and effort you have expended since you bought it. And, hasn''t the laundry business grown and isn''t the cash flow up? Who can say what your businesses'' income volume will rise to if the loan you are requesting is approved? Since you are the expert coin or card operated laundry person, you are the one to project the cash flow. What''s being suggested here is that most folks in business tend to approach a financial institution for money sort of hat in hand. A much better approach is that as a business person you are giving them an opportunity to make money with a loan that is safe and secure. You know the business, they don''t. All they really are concerned about is that the loan amount is safe, and will be repaid promptly and completed exactly as agreed. While it''s certainly OK to just walk into a bank to ask one of their loan officers what their procedures are and what information is that they need to make a business loan, it is not very flattering for their ego to come in and just ask for a loan and be totally unprepared. When you are asking for their guidance, they feel that you are respecting them and their position. Ask them questions about the kinds and types of loans their bank is willing to make. Inquire about the details they want to see in a loan application. If you feel bold enough, ask about the loan authority limits they have. You do that to make sure that you are talking with a bank employee who is himself personally empowered to make decisions, and not a just a junior front man. You can waste a lot of time and effort if the person you are dealing with isn''t high enough up in the bank''s hierarchy and pecking order to grant you the loan. Most senior loan officers in a major bank will have the personal authority to accept loans of moderate size, say $250,000 or less. One of the oldest tricks used by loan officers is to tell you your loan must be submitted to a committee for the final decision. It''s another way they can turn you down without making themselves personally look like the bad guy. If you have once provided that bank with all of the information they initially asked for, and now they need more and more details, don''t look at that as a good sign that the loan will be approved soon. On the contrary, its probably a bad sign It is far easier, for them personally, to keep asking for more details instead of just saying no. So they provide more and more hoops for you to jump through. All the while really hoping you will just go away. Once you have found a bank officer you can work with and who has authority, give them what they asks for in the way of information and figures. A working relationship with any bank is a valuable asset if you are planning to grow your business. Keep the relationship on a friendly yet professional basis. You may be able to argue with your spouse, but don''t argue with your banker. Looking for a loan? Need the money for a good cause? It will happen if you are smart, if you are prepared and if you know how to work with the bankers.