The Triple “A” Funding System – Step Four – Six Stage Funding Analysis – Part One
We now move on to step four of the Triple “A” Funding System.
Having carried out a detailed analysis of our clients funding requirements, it’s time to move into the Application Phase and it starts with the Six Stage Funding Analysis.
The Six Stage Funding Analysis is the point at which we prepare our client’s funding application under six key headings.
A lender wants to receive an application for finance in a structured way that is clear, concise and enables them to quickly understand a client’s borrowing requirements.
As a result, our Six Stage Funding Analysis is not a random process, but rather a strategic document that we have developed as a result of working on thousands of loan applications. It has six key steps, each one building on the one before to create a full and complete synopsis of our client’s funding requirements.
It doesn’t matter whether the client is looking for property development finance, asset finance, an unsecured business loan or invoice discounting.
We put the deal together and always present it to a lender in the same way under the same six key headings. Let’s look at each one in turn.
- Borrower
Who is borrowing the money. It may seem obvious, but it an important point. If you are a sole-trader, you will of course be borrowing in your own name. Alternatively, if you are in a partnership, say a firm of solicitors for instance, you may wish to borrow in the name of the partnership.
If your trading entity is a limited company, then that may be your borrowing vehicle.
Alternatively, you may decide to borrow in an SPV – a special purpose vehicle – which is simply a limited company set up for the sole purpose of borrowing the funds for this particular transaction.
I have also had many instances where the borrower has been the clients pension fund or where an off-shore vehicle is being use.
The important point is, get professional advice. Speak to your accountant and solicitor and take their advice about who the borrower should be.
For instance, I had a case recently of a limited company trading from leased premises, who were acquiring a new freehold property as part of their expansion plans. When they approached me, they had intended to borrow in the name of their trading company. However, I suggested that before we made a formal application to a lender that they should chat through with their accountant the best way to buy the property.
The accountant advised them that the most beneficial way to acquire the property was to buy in their own name and then create a lease to the trading company. So that’s what they did, and we then made the funding application in the clients own personal name.
It may seem a simple point, but it’s important to establish at the outset and certainly before an application goes into a lender, who the borrower is to be.
- Proposition
This is where the bank or lender gets told all about your deal. It is important that a lender fully understands not only your requirements but also the background to your business.
Regardless of the type of funding you require, lenders like to know about your business or the business you are acquiring.
- What’s the name and address of the business?
- How long has the business been trading?
- What sector is the business in?
- How many staff?
- What’s the background to your request for finance?
- Is the business expanding or perhaps consolidating?
- If it’s a new business you are buying, what are your plans going forward?
The purpose of this process is so that the lender who is receiving the application can read the Proposition section and understand immediately all about you, all about the business and all about your reasons for raising finance.
This section doesn’t have to be paragraphs of text, lenders very often don’t have time to read long funding applications. In fact, we make it the opposite. We try and make this Proposition section as concise but clear as possible.
As a result, we often use bullet points for this section of the application. It just makes the proposal concise and easy to understand – perfect for a lender busy looking at perhaps dozens of applications every day.
We’ll discuss the other four headings in the Six Stage Funding Analysis next week.
Until next time.
