Sounds like a difficult question, doesn’t it? This is because banks are quite notorious for not giving out loans to just anybody that walks in through their doors, and with good reason too. Yearly, different kinds of loans are applied for globally. According to the Guardian, between 2011-2016, there have been over 100% increase in car financing and student loans have doubled since 2012 to total over €100 billion in England alone. There is a forever rush to secure a loan, and due to the increase in bad debts, strict caution has been undertaken to protect the bank and its customers’ deposits from which these loans are taken out.
Now just how fast will they give you a loan?
It all depends on you. Many loan policies either strictly follow the rule of the 5 Cs or keep them at the back of the mind when giving out loans. Using this method usually leads to more performing loans than non- performing loans. These 5 Cs are character, capital, capacity, collateral and condition. These are explained in detail as follows:
1. Character can also be seen as credit worthiness. Are you a trustworthy and honest loan applicant? Have you paid back loans on time or even before the due date in the past? What do your employers or staffs say about you? Is there a possibility that you will disappear from the face of the earth when called upon to pay up the loan plus interest?
2. Capital is how much you have invested in the business. Is it a business you can give up so easily? Do you have investments in the form of physical and intangible assets tied up in the business?
3. Capacity is basically your cash flow. Will a look through your financial statements reassure the loan officers of your ability to repay back the loan? Are you transacting in the red or black?
4. Collateral is just a way of saying, “Sir, what do you have as a backup in case you are unable to repay this loan?” Banks require something to fall back on, most preferably non -current assets like land and building, cars and the likes.
5 Condition being the industry trends, economic climate and general business environment is looked at carefully by the bank to ascertain if the loan will likely perform. In times such as inflation and recession, the performance of a loan and the borrower to whom it is handed to is given exquisite attention so that gross mistakes won’t be made.
Once you have qualified for all these, loans will be made out to you as fast as you can say jack. So if you haven’t acquired all these features, I suggest you do so now. Happy loan applying!