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Baltimore SourceLink Business Blog

Understanding Commercial Lending

Posted Nov 20, 2017

What are the first steps in contacting a lender? What are the basic questions a lender will ask me?

-Call the commercial lending department (or bank's branch) to find out the business loan rules.
- Ask if the lender is looking for loans of your size and type?
- Ask for a loan application.
- Prepare all the requested documents and include the business plan.
- Make an appointment.
- Rehearse your presentation.

Basic Questions
- How much do you want? How will the loan be used?

You must show the lender how you will use the money. Give amounts and totals for each category, like this:

LOAN REQUEST
Amount requested..................................................140,000
Owner's Investment.................................................30,000
Other Investors........................................................20,000
Total.......................................................................190,000

USE OF FUNDS
Working Capital (via cash flow).............................25,000
Equipment and Machinery (via estimates)............110,000
Furniture & Fixtures (via estimates).......................25,000
Office Equipment (via estimates)............................30,000

REPAYMENT
Term: $140,000 for five years.....Rate Prime +2 1/4%
Principal and Interest: $3026.52 monthly payment
(based on 8 1/2% + 2 1/4% for a total of 10 3/4%)

Repayment Source: Cash Flow

Collateral offered:

-New equipment & Machinery.............................100,000
-Old Furniture & Fixtures......................................25,000
-New Office Equipment & Computer....................30,000
-Equity in Real Estate............................................70,000
Total.....................................................................225,000

**Typically loans are repaid within 5 to 7 years