Business
It is often believed that bank lending is only accessible to those with money. But if that's the case, then it conflicts with the entire idea of getting a loan. Breaking this misconception with Bob Roark is the CEO of https://ppnb.com/ (Pikes Peak National Bank), https://www.linkedin.com/in/robinjroberts (Robin Roberts). She explains how banks determine the qualified persons for bank lending. She enumerates the most important factors that come into play in such transactions, from the required cash of 10% to your overall credit/FICO score. --- Watch the episode https://youtu.be/BxF538PraYU (here) Robin Roberts: Is Bank Lending Only Available To Those With Money? Have you ever wondered why banks sometimes do things that are not quite clear? In this series, I have Robin Roberts. She’s the CEO of https://ppnb.com/ (Pikes Peak National Bank). She’s going to talk about who banks lend to and why. I thought that might be interesting to the business owners out there so they might be a little more prepared. Enjoy. --- https://ppnb.com/ (Robin), you and I talk a lot about some of the misconceptions and things that we hear on a regular basis. You’ve heard more times than you would like to count, “Banks only lend to people that have money.” That strikes me weird because what do you think they’re going to do. Let’s dive into that and talk about why that is. We have another in the series with Robin Roberts. She’s the CEO of Pikes Peak National Bank, talking about questions she gets asked and some of the answers that people don’t know. Here we go. [bctt tweet="Banks lend based on your cashflow, not on the amount of money in your bank account." via="no"] The comment that is made frequently is that, “Banks only lend to people who have money. It’s when you need money that banks won’t lend and if you have money, then you don’t need to borrow.” Both of those are not true. Banks lend to people who can pay it back. Banks lend based on your cashflow not on the amount of money that you have in your bank account. We certainly look at that. That’s a measure of liquidity for you as a borrower but we’re looking at what cashflow is being generated either from whatever it is that you’re purchasing or generated through your activities. You have a job, so you get paid every month. That’s cashflow. Earnings after expenses are your cashflow and what is left over to make the payment on the loan. From a business perspective, what are your earnings? Were the revenues from your business after expenses you have profit? What is the cashflow available to take on this additional payment? We’re looking at what sources of repayment are there to pay the loan payment. You don’t have to have $200,000 in the bank in order for the bank to make a loan to you. They do look at also after cashflow then what happens if the business, for some reason, can’t make the payment. Is there cash in the bank? Is there cash in you, the business owner’s accounts where you have some liquidity and can make payments? When you’re looking at any business loan, particularly purchasing real estate, you’re going to need 10% of whatever. You’re going to need cash of 10%. There are government programs that can make up that difference, the down payment. You’re going to have to have 10% in. If you don’t have 10%, then there’s a problem. You need to think about it in that way. Otherwise, banks don’t make loans only to people who already have the same amount. If you want a $300,000 loan, you don’t have to have $300,000 in the bank in order for us to make a loan. [caption id="attachment_5897" align="aligncenter" width="600"] Bank Lending: When looking at any business loan, particularly purchasing real estate, you're going to need cash of 10%.[/caption] There’s a myriad of indicators of your ability to pay back. The fight goes, credit scores, the experience in TransUnion of the world. When banks looking at you only lend to people with money, there are...