Loan Approval: Behind Closed Doors
After meeting with you, if they liked you, trusted you, believed in you, and thought that your deal has a snowball’s chance in Haiti, they’ll begin selling the deal up their organization. Keep in mind that your lender is working for you at this point; they’re your salesperson to the rest of their organization. Think of them as such and treat them accordingly.
With large lenders, loan approvals will require that your package will go to a central credit department, in smaller organizations most of the work will be handled by your loan officer. They’ll suggest an appropriate structure and pricing for the deal, and others involved in the decision will either approve, decline, or suggest further follow-up.
Most lending decisions are made by at least two people and often by a credit committee. For example, a lender together with their boss might be able to approve loans of up to $500,000. Together with the approval of the next senior level executive, they could approve loans of up to $1,000,000. Larger loans would require committee approval.
If your loan is approved, the lender will issue a formal or informal commitment letter that spells out the pricing and structure of the loan. If you choose to negotiate (you can and we explain what and how in the Finding Money ebook) your lender will probably have to go back to the people who approved the initial deal, and obtain their permission to make changes. Once the deal is done the paperwork will be processed and a closing date will be set.
If your loan is declined, be sure to ask for reasons and for suggestions on how your request could have been stronger. At least you’ll have learned something about how to strengthen your pitch for the next lender. But don’t give up, sometimes you and the lender will be able to come up with a creative solution to their concerns such as adding a guarantor or additional collateral, but a reversal is rare.
