Requirements for Business Debt Consolidation / Refinancing

This article outlines the qualification requirements for our business debt consolidation and refinancing program. We focus on companies that have:

The following sections explain how the qualification process works, what lenders evaluate, which documents you will need, and what must be provided before the transaction can close.

Step 1: Initial qualification questions

The first step in the qualification process is to determine whether your company is a good candidate for our consolidation/refinancing program. Most lenders typically evaluate the following nine areas, though they apply their own criteria:

a. How much financing do you need?

We typically work with companies that need to refinance or consolidate between $2 million and $50 million in existing debt. Transactions up to $15 million are handled through our conventional financing program. Larger transactions tend to be more complex and are handled through our middle-market group.

b. What does your company do?

We can finance companies in most industries. However, there are some industries that we are unable to finance.

c. Does your company have assets?

The program is intended for companies with assets such as corporate real estate (e.g., your office building), manufacturing facilities, machinery, or equipment. It may also be suitable for growing businesses that need capital to upgrade equipment or acquire larger operating facilities.

d. How will you use the loan proceeds?

The most common use of proceeds is to replace expensive legacy financing with a new financing line that meets your requirements. Additionally, proceeds can be used to buy or upgrade company assets or improve cash flow.

e. Is your company profitable?

Debt consolidation or refinancing is a good fit for companies that have a good business model and are profitable but carry expensive legacy financing. We can also work with companies undergoing a turnaround, provided they have a viable restructuring plan and a seasoned management team.

f. Has your company ever defaulted on a loan?

Defaulting on a prior commercial or federal loan can disqualify a company from our program. Eligibility depends on the circumstances surrounding the default and how recently it occurred.

g. Has the company ever gone through bankruptcy?

Eligibility depends on how recently the bankruptcy occurred and whether any loans were discharged during the process. Loans that were restructured during bankruptcy usually can be refinanced/consolidated. However, companies that had loans discharged won’t usually qualify for this type of financing.

h. Is your personal credit score at least 650?

To qualify for business debt consolidation financing, you must have a minimum personal credit score of 650. Business owners are often puzzled as to why their personal credit is relevant to a business loan. Lenders use your personal credit as a proxy for how you manage your personal and corporate finances. In this case, they see it as a gauge of how you will manage their money.

i. Are the company’s taxes up to date?

Your company should be up to date on its tax returns and filings. Any outstanding returns or filings will generally need to be brought up to date before funding can occur.

Step 2: Documentation requirements

The loan application process requires that you submit a number of personal and corporate documents. If your company is well organized, getting these should be relatively easy. This section covers the documents that companies must submit to their lender.

a. Personal documents

During your application, you will need to submit the following personal documents:

1. Three years of tax returns
2. Personal financial statement for all owners
3. Form 413

Note: Form 413 is often used for convenience. It does not indicate that the facility will be SBA-backed.

b. Corporate documents

You will also need to submit the following corporate documents:

1. Three years of corporate returns (those listed in the personal K-1 statements)
2. Most recent Profit and Loss statement and Balance Sheet
3. Previous 2-3 years of Profit and Loss statements and Balance Sheets
4. Corporate debt schedule. Lists all debt (needed for all entities)
5. Equipment list, along with current market value
6. Projection of future sales (needed if the company is losing money)

Step 3: Prior to closing

Lastly, prior to closing the loan, you must submit the following information for all loans that are being refinanced:

• Original loan documents
• 12-month payment history

These last two requirements can delay transactions at the last minute. Consequently, it’s best to gather these documents early in the process. The 12-month payment history must be generated by your lender. Unfortunately, self-generated documents from Quickbooks or Excel won’t work.

Need to consolidate and refinance business debt?

For information about our business debt refinancing and consolidation program, please don’t call the number above. Instead, fill out this form – a specialized agent will contact you.