Who Will Lend to You and Why?

3 min read • Nov 04, 2013 • Guest Post

Responsible borrowers who have a plan to get ahead will find the right kind of credit product today.

Responsible borrowers who have a plan to get ahead will find the right kind of credit product today.

The good news for would-be borrowers is that there are many options for capital, with more coming every day.

As general partner of Direct Lending Investments, I run a fund that owns loans made to local, established businesses. My investors and I provide the money behind the scenes.

My fund buys loans from a number of online lenders, and I choose these loans based on yield, ability to pay, and willingness to pay. A good loan is a completed loan.  We want you to be finished with the loan just as much as you do!

I like loans where the borrower, perhaps working with an agent, has clearly tried to match WHY they are borrowing with WHAT they are borrowing and WHEN they will repay.

If you need inventory for Christmas, then borrow for the short term.  You may pay a higher interest rate, but you are done with the loan by mid-January.

If you need new equipment that will make you money for years to come, then borrow for 9- or 12- months, get rid of the loan, and start reaping the rewards of your patience and good management.

As an example, let’s take a small gym that needs $40,000 to buy new equipment and jump-start a marketing plan. That is a good reason to borrow money, but no lender wants to own a pile of gym equipment if your marketing plan doesn’t pan out!

Here is what a lender needs to believe to make the new equipment loan:  that you know how to run a gym, that you have a plan to make more money with the new equipment, that if your plan fails your business can still pay off the loan, and that you have the willingness to make payments even if things get tough (and all businesses go through tough periods).

Lenders to local businesses need data to back up your story.  Most use a combination of six months historical bank statements, business credit report, and personal credit report.

Your bank statement reveals a lot about the type of borrower you are likely to be:

  • Monthly total in- and out-flows show that business is steady
  • Number of deposits show that are you open every day, making credit card transactions and dropping a cash bag every night
  • Negative days should be zero or very low, showing that you know what is happening in your account
  • Non-sufficient funds (NSFs) must also be zero or low, showing that you do not make promises that you cannot keep
  • Average daily balance should be reasonable. No lender wants a borrower that is scraping bottom on the till every day

Responsible borrowers who have a plan to get ahead will find the right kind of credit product today.

And who knows – perhaps they will be borrowing from my investors!


Brendan-RossBrendan Ross is the president of Direct Lending Investments LLC, the general partner of a short-term, high-yield, small business loan fund.  An early expert in peer-to-peer/direct lending, Brendan spoke at this year’s LendIt Conference, the largest peer-to-peer lending conference in the country. Previously, Brendan was a turnaround CEO and ran a number of companies, including ReserveAmerica, the world’s largest outdoor recreation reservation company. He has been featured in the Wall Street Journal, Seeking Alpha, Forbes, Fox Business and other outlets.


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