Debt Financing tips provided by our Coachella Valley SBDC Director, Ezekiel Bonillas

Are you looking to fund your business without giving away equity? If so, debt financing might be your solution. Before going to the bank though, prepare your business to meet the following loan criteria checklist I call the three-legged stool: credit, collateral and cash flows.

1. Credit:

Assuring that anyone who has over 15% ownership of your company has a solid personal credit history is key. What do I mean by solid personal credit? Just assure that there is a solid repayment history, there are no thirty-day lates, or bankruptcies, or foreclosures, assuring that your credit cards are not charged to the max. Now this is a very simple step. Just assure that they have a solid credit. It doesn’t need to be perfect, it just needs to be solid, to assure to the bank you can pay back your loan.

2. Collateral:

This is what the bank looks at to ensure that if your loan is going to go into default, how are they going to recollect on that loan? Collateral takes many form but the most known is real estates and immediate liquid assets that your business may have.

3. Cash Flow:

As simple as it is, most folks don’t realize that your company needs to make money in order for banks to know they are going to get repaid. Solid cash flow shows you have the ability to repay your loan.

If you take care of these three simple steps, you are a step closer to meet the banks expectations and hopefully get your loan request approved.

Ezekiel Bonillas
CV SBDC Director: Ezekiel Bonillas

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