Dr. Marvin Lozano
When taking out a loan or line of credit, there are four basic questions that a lender will ask:
1) Credit
2) Cash flow
3) Collateral
4) Conditions
The first is important for any owner of an existing business or startup – either operation is eligible for a loan or line of credit. And those who may have a slightly shaky credit record may still be eligible for a loan but they should be prepared to answer questions about what happened, according to Marvin Lozano, a former commercial lender who has extensive experience in lending to small and large businesses and multinational exporting businesses and international businesses.
When asked about cash flow, Lozano said a business owner should be prepared to answer this question with a plan on how to pay the loan back. The collateral question is an inquiry into what resources or assets a business owner has such as a home or vehicle that could be offered to the lender as assurance that if you fault or do not pay the loan, this will be taken as payment.
“Do you have equity in your house or what is the applicant willing to put up?” Lozano says. “What they want to know is I, as an applicant, am going to do everything I can to make this successful.”
The conditions question is an inquiry into how the applicant is going to overcome challenges or perhaps take advantage of opportunities. For example, during COVID-19 the transportation industry saw a slowing of transport of supply chain goods, however, small truck drivers became a big part of delivering to regional grocers.
Other questions that will follow in this process include how much of your own money you’re putting into the business and how much money you have on hand in the business, in addition to how much you project to make in the next few months.
It all can sound complicated but Lozano reminds all entrepreneurs that being successful in business and finding funding to help start or grow your business is about find your niche in the market place:
• You don’t need a whole new idea to start a business.
• You don’t need a lot of money to start a business.
• Use what you already know or from experience or training.
• You don’t need a 20-page business plan.
• You do not need to buy or rent a building to start a business.
“Don’t give up,” Lozano said, adding that getting into an entrepreneurial mindset is what helps you navigate the waters. “Resilience is very important.”
For more information about loans and lines of credit, contact a Loan Fund loan officer at 505-243-3196.
Dr. Marvin Lozano is a loan officer with The Loan Fund and a small business consultant. He and his wife offer a bimonthly webinar with the New Mexico Small Business Development Center (NMSBDC) and the SBA on lending and preparing for and moving past potential detrimental disasters like COVID-19. To view past episodes of Dr. Lozano’s webinars, go to NMSBDC’s YouTube channel.