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Paul Bosley

Paul Bosley

Editor’s Note: This column was written by Paul Bosley for InsightSuccess. Bosley is the founder of the Business Finance Depot

The process of underwriting Small Business Administration (SBA) loans, equipment leases and equipment financing agreements has evolved significantly since the pandemic began a year ago. The purpose of this article is to share our observations of the six key factors considered by analysts in the underwriting process.

It is a rare occurrence that applicants are strong in all areas, so the process is subjective in many respects, weighing the following key considerations.

WHAT IS YOUR PERSONAL CREDIT SCORE?

A 700-plus credit score is a safe minimum standard. By looking closely at your credit report, lenders can gauge how well you pay your bills and if you have comparable credit. If an applicant is a homeowner with a house mortgage that is current, an analyst can determine if the applicant is or has serviced comparable credit. Lenders also consider your available credit compared to your current level of debt which is used to calculate your debt-to-income ratio. This ratio is calculated by comparing your annual family income to your current annual debt payments. Some lenders calculate a global debt-to-income ratio which adds the estimated annual debt payment of the loan or lease to your current annual debt payments.

WHAT IN YOUR BACKGROUND WILL LEAD TO YOUR FUTURE SUCCESS?

Underwriters first look for work experience and/or education in the industry you are applying to secure financing. Previous or current ownership and/or management experience within the industry is especially highly valued. Next, portable skills learned from positions outside the industry including finance, sales, marketing, and management are then considered if you have not previously worked in the industry. Finally, educational degrees in the field or a related field are also considered. In short, creating a résumé to highlight and customize your strengths is an important element in securing loan approval.

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