The Triple “A” Funding System – Step Seven – Lender Approval
This week we continue our look at the unique Triple “A” Funding System, which is the system we use every time we work with a client. It is a specially devised 9-step system which speeds up the process of obtaining business finance for our clients.
In last week’s blog, we looked at Step Six – the Lender Review which as you will see from the graphic, means we have now gone through both the Analysis Phase and the Application Phase of your funding application, and means we’ve reached the final phase of the Triple “A” Funding System – the Approval Phase and Step Seven which is the Lender Approval.
This means your funding application has been successful and you have been approved for a loan.
However, we’re not there yet, and the mistake borrowers often make is to think “that’s it, we’re there, it’s all downhill from here”.
In fact, quite the contrary. There is still work to be done.
So, whilst at this point, your application for finance has been successful and your funding has been approved, a word of warning. Believe it or not, this third and final phase can take the longest time and it can also be the most frustrating.
There are several reasons for this and I’ll talk about them over the next couple of weeks as we go through the detail of this final phase. I’ll also highlight what to look out for and how you can avoid the delays that can often occur.
So, Analysis Phase complete. Application Phase done. It’s time to move into the third and final phase the Approval Phase and it starts with the Lender Approval.
Good news! Your loan application has been approved. The lender has reviewed all the documentation they’ve been sent, the deal has gone to the lenders credit committee for sign off and your loan has been approved.
Depending on the type of loan you have applied for one of two things will happened.
If you have applied for an unsecured business loan, invoice discounting or asset finance, the lender is ready to move to the next stage and issue the loan documentation and I will cover this in more detail next week.
However, if you are a business who has applied for a commercial mortgage, or you are a property investor or developer and have applied for either development finance or a bridging loan then the security for your loan will be a freehold property of some description and this will need to be valued.
So, if you have applied for a commercial mortgage, development finance or a bridging loan the next step in the process will be a valuation.
Valuations come in all shapes and sizes, so let me cover off a few points.
Firstly, do not go off and get a valuation done yourself. Clients often ask me: “shall I get a valuation done to save time?” And my answer is always the same. “No!”
The reason for this is that lenders have a panel of specially selected valuers they will want to use. Two of the criteria lenders will use for deciding on what valuer to use will be the location of the property and the type of property being valued.
For instance, a warehouse on an industrial estate in North London will be viewed very differently from a guest house in Blackpool, which in turn will be viewed very differently from a residential development site in Devon. All very different propositions requiring very different types of valuation.
The point is that lenders use different valuers for different property types, and these valuers need to be on the lenders approved panel.
So, please don’t go off and do a valuation yourself thinking you may be saving time. Not only will it not save time it may cost you money. Only recently a client approached us for finance and brought with them to the initial meeting a valuation they had recently commissioned.
The valuation had cost £1,200 including VAT. Whilst it was helpful for us in the initial stages of analysing the deal, when it came to the Lender Approval step, we had to get a new valuation done because the clients valuer wasn’t on the panel for the lender doing the deal.
Both expensive and frustrating for the client. So, a word of warning, do not go off and do your own valuation. Rather wait, get your funding application approved, find out what type of valuation the lender requires and only then do we go ahead and get the valuation carried out.
Valuation complete, it goes back to the lender for them to review, and subject to the valuation being satisfactory, the valuation is ‘signed off’.
Now that we have full approval for your loan, it’s time to move on to the next step in this final phase – Loan Documentation.
We’ll talk about that next week.