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What’s the Loan Process Like and Where is My Information Going?

Author: South Valley Chamber
Published: September 11, 2018

You’re a small business owner. You need a loan. Your first thought is to turn to a bank, but did you know that many credit unions also offer business loans? Member Business Lending (MBL), a CUSO in Draper, Utah provides their family of credit unions access to a complete suite of commercial loan services, which in turn allows them to deliver the best products and services to their business members, and access to the appropriate financial resources they need to succeed.

You’re likely asking yourself, “what’s a CUSO?”  A CUSO (credit union service organization) is an organization formed and/or owned by one or more credit union(s) to provide a specific product or service.

For more than 15 years, MBL has been behind-the-scenes playing a huge role in helping credit unions in making sure your small business has an alternative to traditional banks for your business loan needs.

Their vision is to be the foremost provider of commercial lending services and have created a culture focused on helping businesses help people, the credit union way.

We sat down with MBL and talked all about the loan process and the role they play.  We wanted to know, what does the process really look like from the back-end and what is everyone doing with your information?

We explored four crucial elements you’ll find in any loan process:

  1. The application process
  2. Underwriting the loan
  3. What to expect after the loan is approved
  4. Unexpected circumstances

In any loan process, a business owner will need to submit a variety of documents in addition to an application. This includes personal and business financial information for each owner, (e.g. tax returns, a profit and loss statement, personal financial statements, business debt schedule, etc.). If you own more than one business, the other businesses are considered “affiliates”.  The financial information for all your affiliates will also need to be submitted so that a global cash flow analysis can be performed.  You’ll also need to provide a business history and management resumes for each principal, along with a business plan, especially if your business has less than two years of operations.  Don’t forget your entity documents!  Whether you’re a sole-proprietor, a partnership, LLC, or a corporation, you’ll need to provide proof that your business is “in business”, and in good standing. There’s a lot to remember, but don’t worry, MBL’s credit unions have checklists you can use, and their operations team is there to ensure that all the necessary documentation and information is compiled, reviewed and organized in a timely manner to make sure you have an excellent lending experience.

Once all of the application information has been turned in, the waiting game begins as the loan is underwritten. Underwriting is simply analyzing risk – from the standpoint of both the and the business seeking a loan.

Underwriters use the financial information you provide to prepare an analysis that offers the lender (aka the credit union) a perspective of the financial health of your business(es), and a determination of your ability to repay the loan.  They will also identify and analyze secondary sources of repayment (aka collateral).  As they dive into your business plan and look at the historical trends – how your business has been operated, what you project for the future, and what the business is doing to create additional opportunities, and gain advantage over its competitors, they also review the management resumes to determine your management team’s skillset and look at your credit history.  Analyzing all this information determines the level of risk involved with your loan. The bottom line is that if you present a low risk, and can prove repayment capability, you will most likely get the loan.

After the credit union has approved the loan, time is spent developing the closing documents, which includes a series of reviews to make sure everything is correct. The documents are sent to the credit union, who will sit down with you and the other responsible parties on the loan, to explain the agreements and your responsibilities as a borrower, and gather signatures on everything. Once everything is signed and any outstanding items (aka contingencies) from the application and underwriting processes are completed, funds are disbursed. Closing and funding are usually the fun parts. Now that you have the funds you need, it’s time to go and further realize your dreams.

From that point forward, until you repay the loan in full, you will be required to provide the credit union with copies of your financial information every year so that an annual review can be performed.  Annual reviews are like yearly health checks for your business. As your payment history is reviewed, along with the up-to-date financial information from your business, underwriters can diagnose warning signs indicating possible trouble and can work with the credit union to make any needed adjustments to assist you in meeting your financial commitment.

Your credit union should be considered a trusted financial partner to your business. If you happen upon unfortunate circumstances that negatively impact your business and its ability to meet its financial obligations, immediately communicate with your credit union and let them know what is happening.  Remember, the credit union wants you to succeed!  The best thing you can do is keep communication open. Be kind to your lender, they’re trying to help. Although annual reviews are performed to determine any signs indicating trouble, sending out an SOS at the first sign of trouble gives everyone involved the best chance to develop a successful workout plan.  Workout plans are designed with your business in mind. Consideration is given as to how you and your family, your employees and their families, and the community in whole may be affected if your business goes under.  Their focus is to do what they can to help your business survive. After all, the credit union philosophy is “People Helping People”.  With the assistance of CUSO’s like MBL, credit unions are taking their philosophy to the next level by “helping businesses help people, the credit union way”.

Yes! If you need help getting a business loan, MBL can help! MBL has a large network of credit unions across that country that are looking for opportunities to serve business members.  As the back office for these credit unions, you get straight to the processors and underwriters. Not only will they give you a quick response, if you’re a strong loan candidate, but they will also find a credit union to fund the loan. Alternatively, if your risk profile is too high, they will provide you with actionable insights to help you make the changes you need to become a lendable candidate.  If your business needs financial assistance, and you would like more information about ways MBL can help, send an email to info@mblllc.com.

To learn more about Member Business Lending, visit http://www.mblllc.com.  Follow @mblcuso on Twitter, and connect with them on LinkedIn at: https://www.linkedin.com/company/member-business-lending-llc/.