You may not know this but, lending money is almost as hard as borrowing it. One of the first things I learned in my job as an agricultural lender was figure out how you can get repaid if the loan doesn’t work out. Lenders often assume failure first, then consider the chance of success later. It should be the other way around: consider the reasonable likelihood for success first, then what if it fails as a second thought.
You see, it’s easier to get fired as a lender for making loans than it is for not making loans. High risk loans that default equal high risk for ongoing employment for the loan officer. Sorry to be so blunt about it, but lenders care about themselves first and you second.
Here are three points all professional horsemen should know and understand about borrowing money.
1. Be exact with the dollars needed and specific with the intended uses for the borrowed money. I recall many farmers who came in my office and asked me about a loan. I’d ask, “ How much do you need to finance the equipment?”
“Oh, about $ 50,000 to $ 100,000 dollars” was the answer.
Can you hear the the TV game show buzzer for wrong answer?
If you’ve looked at a loan application, the form has a short blank for a specific loan request. There is no “about” mentioned. Lenders can’t deal in loose terms like around, about or somewhere near.
2. Know your numbers. Much like hearing the word about, lenders become nervous and suspecting when the loan applicant is unsure about the numbers of the business. They want to know specifically how you arrived at your projected income, expenses and net income intended to repay the loan you request. It’s OK to have someone else assemble, prepare and package your business numbers. However, it’s not OK if you don’t understand the methodology of how they were assembled.
3. Make it easy. You may think it’s sometimes questionable, but lenders are human. And human nature is to do the easy things first. They have plenty to do and reworking your sloppy loan application package is not a welcomed task. Your chances for approval are always improved by coming in with a solid, complete and well-documented loan package. Proofread for grammatical errors, spelling and most important, make sure the request makes sense. Just like a tax return, the numbers have to add up correctly. A math error signals the possibility of other errors in the application. Faulty math in the proposal may lead the lender to suspect flawed business practice. Avoid giving the lender any reason to start thinking about reasons to deny your request.
If you aren’t strong with the finances of your horse business, get some help. By doing so, you demonstrate your strength in good business practice. Business owners wear many hats and some of the hats don’t always fit well.
There is nothing wrong with getting assistance with your loan request to make your job of making it easy for the lender, easier for you, too.