Anticipate questions by our analysts such as:
Are all the owners identified? This is sometimes not obvious from the application itself and it's therefore important that you always ask this question of your applicant. Also, the name of the firm sometimes suggests that there are other owners. An example is a business named S&W Machine Shop. S&W suggests 2 owners - one whose name starts with S and another name that starts with a W. Another example would be a name like Abbott and Son, which could suggest multiple owners.
In other instances, the legal owner is not the real operator of the business and it is important that we know who has the experience and who will be managing the business. This circumstance is often true of minority owned businesses where one spouse may be the legal owner but the other spouse is the operator/manager. In these instances we need to know just who the operator/manager is and will require a credit bureau on them as well as the legal owner. Unfortunately, on some occasions we find that the real operator knows they have bad credit and submits their request through the name of the spouse with good credit. This will generally be discovered during the analysis process and only slow the decisions so try to avoid this pitfall up-front by confronting the applicant with these questions.
Is the equipment being requested consistent with the name and nature of the business? For instance, why would a retail ice cream store be seeking a bobcat? Don't laugh, we see these sorts of requests more frequent than you might suspect. Undoubtedly, there is a "story" here that probably makes sense but without the story we are going to be confused and will always need further explanation before the deal will be considered. So do your lessee a favor by anticipating our review of the deal and don't leave apparent questions unanswered. Address any "story" up-front and give us the answers when you submit deal.
Does the lessee have experience in the business/industry being proposed? In most instances, and certainly for start-ups, we require the PG to have a background in the business they are operating or intend to open. Many business failures are attributable to the lack of experience in the line of business being presented. If no related experience can be gleaned from the CBR it would be necessary to interview the applicant and provide an explanation of the PG's logical business experience in the proposed business/industry.
It doesn't happen often, but from time-to-time, we see a PG who's only employment experience is as a Registered Nurse at XYZ Hospital or who is an 80 year old retired CPA who is starting an auto repair business…perhaps the submitting broker was asleep at the switch but each probably begs a bit more than the "experience" question, right? We decline these deals simply on the basis of "lack of related industry experience".
More importantly many of these inexperienced PG's are "fronts" for an experienced party who might be lacking in some credit qualities. When you suspect another operator please sleuth out the credit of the operator and if they are bad apples, decline the deal up front. If the real operator is simply a shallow credit and is truly seeking a second related party to lend credit support, we will consider this situation but we will need the operator as a guarantor. Request their guaranty and submit the entire credit picture for our credit team to evaluate.
