Page 32 - Wire Rope News & Sling Technology - April 2019

continued from page 30 which is cost. “Fees charged by these the credit score and the financial con-
in specific industries, and their greater platforms are high, often ranging from dition of the borrower, the higher the
knowledgeable can translate into more three to seven percent of the loan,” says cost of funds and the shorter the terms
flexible lending policies.” Vrancik. When you add those fees to of the loan.”
the interest rate charged, she says, the Funding from nonbank lenders also
The Downside loan can be quite expensive, resulting carries risks that business owners may
Of course, alternative lenders aren’t in an Annual Percentage Rate (APR) of not fully appreciate, says Vrancik.
without drawbacks — not the least of up to 40 percent or more. “The weaker “One risk arises from the fact that the
financial analysis required by nonbank
Vetting the Nonbank Lender lenders is often not as exacting as that
Landing a good deal with an alternative lender requires careful planning and of traditional banks. As a result the
vetting. The loan application should convince the lending platform that the bor- financing can end up being a little too
rower can capitalize on the borrowed funds and can meet the repayment schedule. easy, and the small business owner can
“Start by identifying what you need the money for, how much you need and be tempted to take on more debt than
for how long,” says Barbara Vrancik, a small business financial consultant is prudent. That can spell trouble for
based in New York City (BarbaraVrancik.com). small businesses who are often under
Then go one step further by showing the prospective lender how the bor- very tight cash constraints.”
rowed money will result in higher profitability, generating the funds required
to repay your loan. Look Twice
“Have a detailed plan showing how your loan will make at least two times The bottom line is to have a firm
as much money as its total value,” suggests Marilyn J. Holt, a Seattle-based grasp of your ability to meet the man-
consultant and author. “And have a strong, verifiable plan rooted in reality for dated repayment schedule. “If you can-
how and when you will make your repayments.” not repay your loan quickly, then non-
When researching prospective lenders, Vrancik suggests asking these questions: bank lenders will be the bane of your
• What are the interest rates and fees? existence,” cautions Holt. “They often
• How frequent are repayments, and in what amounts? move faster to collect their debts than
• Does the lender require collateral? the large, cumbersome banks, and that
• Will the loan restrict your ability to incur additional debt, or to operate can ruin your credit. While they some-
your business in any way? times will restructure your loan, that
• Can you modify the terms of the loan if you should need a waiver or exten- will seldom be to your advantage. Keep
sion down the road? in mind that even though they want
Compare the answers from the prospective lenders and go for the best deal.
continued on page 78
32 Wire Rope News & Sling Technology April 2019