Seven Tips For Credit-Enhancing Your Business Loan

What are the avenues available to businesses with weak credit profiles or to companies pursuing credit transactions that are perceived as too risky by credit providers? Many companies apply for credit at banks, finance companies or equipment leasing firms and are routinely rejected due to the high degree of perceived credit risks. When approaching a credit provider, it is helpful to understand what can be done to reduce the risk of a credit transaction in the eyes of the provider. Never accept a credit rejection without considering credit enhancements. Here are a few tips on credit enhancement to help guide you in approaching the credit process:

1. Credit enhancements are modifications to credit transactions that improve the risk-reward relationship for credit providers. Enhancements can be real or merely perceived by the receiving party. Also, they can be tangible things like real estate and equipment or they can be intangibles like future rights or options.

2. Use credit enhancements to strengthen credit transactions and to improve pricing or terms. They may be used to entice credit providers to approve credit transactions that would otherwise be unacceptable because of the perceived risks. They can also encourage credit providers to make transaction approvals faster.

3. Credit enhancements usually fall within one of these general categories: improvement in credit terms favoring the credit provider; additional collateral; guarantees, insurance or third party assurances; increased pricing, compensation or upside gain potential; or granting of specific rights or options.

4. Some specific enhancements include: granting a security interest in additional equipment, real estate, inventory, accounts receivable, intellectual property rights or other company assets; pledging cash; pledging securities; third party guarantees; surety bonds; letters of credit; pledging cash value of insurance; increase in transaction rate; additional fees or other transaction compensation; shortening the term of certain transactions; granting first refusal rights on future transactions; permitting call options; obtaining re-marketing guarantees or agreements.

5. When considering using credit enhancements to improve your transactions, use these guidelines: try to get a fair and objective assessment of your credit profile and the inherent transaction risks from a knowledgeable credit person; take inventory of the possible credit enhancements your firm can provide; evaluate the cost of possible enhancements to decide whether using them will be worthwhile; if there is time and opportunity for a second chance to present your transaction to the credit provider, present it first without the credit enhancement or with the minimum enhancement you think acceptable; of the credit enhancements available to your firm, decide which ones will be effective and the degree of enhancement necessary to achieve your objectives.

6. It helps to develop a credit enhancement strategy in the planning stage of your transaction. Start by understanding the transaction's credit strengths and weaknesses. Decide which enhancements available to your firm will help strengthen the risk profile of the transaction. Try to assess the credit provider's sensitivity to various types and degrees of credit enhancement. Later, if the credit provider turns down your transaction or proposes unacceptable terms, ask the provider to suggest enhancements that will make a difference in the decision. You may be able to negotiate further, once you have this information.

7. All credit enhancements have a cost. In many instances the cost is the opportunity cost of not having the credit enhancement available for future use. Before offering or providing a credit enhancement, do a thorough cost-benefit analysis to make sure the potential benefit is worth the cost to your firm.

Though it is not always possible to enhance a credit to the satisfaction of credit providers, you should understand the value of credit enhancements and know when they may be useful. By carefully considering potential credit enhancements, you can often improve the pricing and terms of your firm's credit transactions. If your firm has a weak credit profile, use of a credit enhancement might make the difference between obtaining financing or being rejected.

George Parker is a Director and Executive Vice President of Leasing Technologies International, Inc. ("LTI"), responsible for LTI's marketing and financing efforts. A co-founder of LTI, Mr. Parker has been involved in secured lending and equipment financing for over twenty years. Mr. Parker is an industry leader, frequent panelist and author of several articles pertaining to equipment financing.

Headquartered in Wilton, CT, LTI is a leasing firm specializing nationally in direct equipment financing and vendor leasing programs for emerging growth and later-stage, venture capital backed companies. More information about LTI is available at: http://www.ltileasing.com.

---

Online Car Loans - Getting a Good Quote Online

Online car loans enable you to get a good quote... Read More

Lawsuit Loans - Caveat Emptor!

If you have been injured in an accident it is... Read More

Want a Cheaper Finance for Your Vehicle? Try Secured Automobile Loans

The usual modus operandi in most automobile purchases is as... Read More

Secrets & Benefits of Secured Loans

Borrowing money has become more and more popular in the... Read More

How to Get a Secured Loan UK

Living in the United Kingdom, you might find yourself in... Read More

Secured Business Loans ? Equipping Your Business Blueprint With Concrete Groundwork

Somebody once said, 'Business is not financial science; it's about... Read More

Meeting the Balance of Agricultural Financing

Agriculture loan guaranteesFor better understanding of the agricultural loan guarantee... Read More

Simple Tips On Getting Your Loan

So, you want to get a loan?Here are some simple... Read More

Top 10 Ways to Avoid Loan Fraud

Every year, misinformed homebuyers, often first-time purchasers or seniors, become... Read More

Beware of some Get Cash Now Vendors

Some weeks it feels like you're living hand to mouth.... Read More

Useful Information About Homeowner Loans UK

Homeowner loans UK are a very versatile type of personal... Read More

How to Spot and Avoid Predatory Lending

Predatory lenders promise loans that are "too good to be... Read More

Cash Advance Company - Comparing Payday Loan Companies Online

Comparing payday loan companies online saves you time and money.... Read More

Financial Openings Without Warranty Alias Unsecured Personal Loans

Isn't it the trillionth article on unsecured loans? All are... Read More

Bridging Loans - Fulfilling Financial Shortfall between Real Estate Transactions

You are trying to buy a new property and selling... Read More

Bad Credit Wedding Loans in Case You want to Race Towards the Altar with Bad Credit

So you are engaged. Congratulations. It was not easy. What?... Read More

Free Money Saving Auto and Home Loan Tips

Free Auto Loan TipsThe following tips should help increase your... Read More

How To Easily Find A Military Loan

Military members the price for serving your country and defending... Read More

Shopping for a Secured Personal Loan

If you find yourself looking for a loan, you'll likely... Read More

What is a Cash Advance Loan?

A cash advance loan is a short-term loan secured by... Read More

Useful Tips On Buying A New Or Used Car

Buying A New Car: A new car is second only... Read More

Guide to Home Improvement Loans

Here is a useful guide to Home Improvement Loans. What... Read More

Cant Wait For Payday? Try Check Advance

Check advance can come in really handy when you're waiting... Read More

Your Home Can Act As Carriage For Car Loans; Do You Know The Term For That? Secured Car Loans

Since the invention of the first self propelled car by... Read More

Car Loans for People With Bad Credit

Car loans for people with bad credit are readily available... Read More

Motorcycle Loans For Military With Bad Credit

Motorcycle loans for military with bad credit aren't hard to... Read More

Payday Loans - Ways to Keep Your Costs Low

Payday loans offer a fast and easy solution to financial... Read More

Fast Cash Payday Loans

If you need cash now there are several options available... Read More

A Guide to Finding Cheap Loans

Finding cheap loans isn't always easy? it seems like every... Read More

Useful Tips on Personal Loans

Here are some useful tips on Personal loans. You can... Read More

What is a Car Loan?

A car loan is a type of credit offered by... Read More

A Guide to Looking for Cheap Online Loans

Cheap online loans may seem hard to come by, but... Read More

What is a Bad Credit Personal Loan?

A UK Bad Credit Personal Loan is a loan designed... Read More