Part 2 – Get Better Loan Terms: Reporting

Want better loan terms and faster approvals?

Be your bank's favorite customer.

📢 PART 2: REPORTING. This is very important to banks.

BACKGROUND

What is Reporting? When you close a commercial loan with a bank, they will require you to submit business and personal financial statements on a periodic basis.

What reports do banks want? It depends on the type of loan, but here are a few: rent roll, trailing 12-month income statement, balance sheet, personal financial statement and tax returns, etc.

Why do banks ask for this? They want to track the probability of you continuing to make loan payments. This probability is called a Risk Rating. A risk rating is like their own in-house credit score.

WHY IS THIS IMPORTANT TO YOU?

Because this could impact: (1) your existing loan and (2) your next loan request

1️⃣ EXISTING LOAN

Profitability: Your existing loan has a risk rating. At some point if you don't submit your statements on time, the risk rating of your loan could be lowered- making your loan less profitable to the bank. Don't hurt your bank's profitability on your loan by not submitting your financial statements on time. That makes you a less profitable customer to them.

Time: A lot of time gets wasted chasing down late financial statements. It's a headache for everyone on the team.

2️⃣ FUTURE LOANS

If you want a second loan from your bank, your reputation matters. If you are showing up on PAST DUE REPORTS on a regular basis, it damages your reputation.

What's a past due report?

Each week/month, there is a report that is produced that shows all the customers who have not submitted their financial statements on time. Key decision-makers - like the commercial sales manager and credit officer - see this report. At some banks, these are the only 2 people that need to approve your next loan request.

When your loan officer goes to bat for you in credit committee on your next loan request, they can have an uphill battle because you are always late on your reporting.

The credit officer could see you as someone who doesn't keep their promises to the bank. If the credit officer has this doubt, your next loan request can be harder to get approved or have stricter requirements.

➡️ WHAT SHOULD YOU DO?

1. Submit your financial statements on time. Best way to be on time? Plan to submit early.

2. Organize your bookkeeper and accountant. Make sure they know what your bank wants and when. Give them what they need to do their job – and then hold everyone accountable.

3. Be accurate. Trust is the most important currency you have with your bank. Accurate reporting is important.

▶️ Upcoming

This is Part 2 of the series: "Be your bank's favorite customer."

This will help you:

1. Get you better loan terms

2. Exceptions that other customers at the bank don't get.