Episode # 94, The Christmas Business Check List- 7 Steps to Make Your Business Lender Ready

Chapters

• 0:00 Why December Planning Matters
• 1:45 The Cost Of Capital Reality Check
• 3:25 Introducing The Seven-Step Lender-Ready Checklist
• 5:15 Step 1: Application Essentials
• 7:10 Step 2: Personal Financials And Tax Returns
• 9:00 Step 3: Business Financials And Cash Vs Accrual
• 12:00 Step 4: SBA Form 413 And Global Cash Flow
• 15:30 Step 5: Bank Statements And Equity Injection
• 19:30 Step 6: Current Financials And Realistic Projections
• 24:20 Step 7: Business Debt Schedule And Refinancing
• 27:20 Step 8: Defensible Projections That Pass Scrutiny
• 31:00 Current SBA 504 Rates And Down Payment Rules

Transcript

SPEAKER_00: 0:03

Welcome folks to show 94 of CDO to Raymaker. Happy holidays. You know, one of the critical factors in business is to engage in planning, both short term and long term. If you do anything on the fly, I'll probably see your tombstone in the business cemetery. It's very crowded in that cemetery. There is virtually no more space, so don't let your business die. Make it live. Plan. The mission of today's podcast is to offer advice that December is the perfect month for small business owners to set goals, plans, and budgets for the 2026 fiscal year. While there are many departments of your business that require plenty, the most important, bar none, is finance. You need dough to buy inventory, fund staff, more equipment, more space. In plain language, ask yourself how much money will I need to make my 2026 expansion goals happen, both business and personal. Most owners borrow the amount that they think they need from commercial banks and similar institutions because the interest rate is the lowest. It's usually 7 to 11% as of today. But their criteria is the strictest. So anybody can get approved online from a lender in 48 hours for the dubious honor of having to pay an interest charge of anywhere from 30 to 60 percent. You don't want to be part of that group. You may do all the proper research and planning and present your quest to a commercial lender and get unceremoniously turned down. Not a good feeling. Not to mention, you won't be able to scale your business. Today's podcast addresses the ABCs of loan approvals and loan declines. The title of today's show is The Christmas Business Checklist: Seven Steps to Make Your Business Lender Ready. This list was compiled by AMPAC Business Capital, one of the leading SBA lending institutions in Southern California, as a service to its loan applicants. AMPAC has affordable money on their own, but they also have a vast network of commercial banking partners. They are intimately aware of the commercial banking partners' underwriting criteria. I will have to say this because I'm familiar with all of the institutions. AMPAC and the business criteria are similar, but Ampact is more lenient and forgiving. My special guest and I will educate you today on these seven steps and much more so you can significantly increase the odds that your loan will be approved. My guest, Brian Kennedy, is the ecosystem director of Ampact Business Capital. Brian has a master's degree from Providence College. I think that's some school on the East Coast. I don't know why he went there because he's a West Coast kid and he's a key executive of the company. So let's get her done. Ladies and gentlemen, please help me welcome Brian Kennedy. Brian, how are you doing, man? Oh, I'm doing well, my friend. How are you? Doing good. Thank you for jumping on in this episode. It's really important, I believe. So what I'd like to do, Brian, is to identify to have you identify the seven steps very quickly. Then you and I can discuss each step in greater detail. So uh is that okay with you? That works well, my friend. All right, so there's the floor is yours. What are the seven steps?

SPEAKER_01: 4:17

So, Gene, we really like to keep these. We use the number seven because it's simple, right? And it's a short enough list that is comprehensible. So the seven steps that we notate are pretty simple. One step one is the application. You have to submit an application for people to be able to see one, what you're requesting and who you are, right? Yeah. Your your individual personal information, your company information, what type of capital you're requesting, and for what purpose. That's what a loan application is going to give us. Critical information for us to even understand how you are looking at a loan request.

SPEAKER_00: 4:53

All right, Brian, let me ask you a quick question. Does that does that step trip up a lot of your applicants? It seems pretty straightforward.

SPEAKER_01: 5:01

It seems pretty straightforward. But sometimes people do get a little caught up on some of the pieces like, hey, ownership structure. Do I have to, hey, where do I find my credit score? Right? These are some of the things we see that are pretty straightforward questions, but sometimes people don't know where to find. So we understand that. We're happy to give support in those areas if it's needed as well. All right. So step two, da-da-da-da-da-da drum roll. What's that one? Yes. So step two, personal financials. Depending on who owns the company, we're going to ask for three years of personal tax returns for anyone that owns 20% or more in the business. That is because as you are looking to get lender ready, you have to be assessed as an individual who runs the company as well. And so step two is for us to collect personal tax returns to see your financial personal help.

SPEAKER_00: 5:55

Okay, so then uh your loan applicants better have a CPA that's uh quick because sometimes there's a delay in the tax returns. You know, we asked for extension and then you got old numbers, et cetera, et cetera. Okay, well, that makes sense. All right, so step three, what's that one, Brian?

SPEAKER_01: 6:14

So step three, we look at the business tax returns. Those are really critical for us because we are a business lender. We have to see the financials of the business. We asked for the last one to three years of business tax returns. Now, if the business owner doesn't have them, we can replace number three of business tax returns with a business plan and financial projections if they are a new company. But either way, step three is business financials.

SPEAKER_00: 6:42

Okay. So let me interject for a second here. Um only because I used to do this for a living. So normally business tax returns are done on a cash basis. Um, and the financial statements, uh, especially if the company has accounts payable or accounts receivable, are done on an accrual basis. So if you have a client who is showing on a cash basis tax returns not very much profit, but on their financial statements on an accrual basis is making a lot of profit. Is that okay? Do you take that into consideration?

SPEAKER_01: 7:23

Absolutely. Absolutely, absolutely. But those are the things we have to assess. And so when we do assess those, that's where we become a little bit more intimate with your business.

SPEAKER_00: 7:35

Okay, that makes sense. Because as you know, most people don't want to pay Uncle Sam tax income tax on money or sales. They haven't received the money yet because it's still stuck in the receivables, they haven't got the money yet. All right. Step four, what's what's that one, Brian? So step four is a little bit more fun.

SPEAKER_01: 7:59

It's called the SBA Forum 413.

SPEAKER_00: 8:02

That sounds so much fun. Oh my god.

SPEAKER_01: 8:05

It is, Gene. Can I do it in my part-time when I'm getting bored? So, Gene, the personal financial statement, once again, is for owners at 20% or more, but the personal financial statement digs into your personal finances a little past your tax returns. So we look at personal assets, personal liabilities, personal income, any personal debts, life insurance policies. We dig into what may be used as a personal guarantee for the business loan in a nutshell. That's what a personal financial statement is.

SPEAKER_00: 8:38

I gotcha. I gotcha. Now, um, does it matter to you what the value of their business is? Because that's an asset that has to be on the personal financial statement. And I guess it could be an estimate, but does the value of their business have any bearing to you on their net worth as loan applicants?

SPEAKER_01: 9:04

There it does. It does, because we have to look at both sides. That's what we call global cash flow. So we look at business cash flow, but we also look at personal cash flow, which brings us to what we call global cash flow, which is business financials as well as personal.

SPEAKER_00: 9:20

Wow. Now we're really getting in the weeds. Now my uh now my listeners know what global cash flow is. That's both business and personal combined, right?

unknown: 9:31

Correct.

SPEAKER_00: 9:32

That's right. And your and your business debt combined.

SPEAKER_01: 9:35

Got it. Okay. Um now you're getting into the fun stuff, G. That's right.

SPEAKER_00: 9:42

Okay, so if someone has if some if an applicant has a business but doesn't have a lot of debt, but has a personal financial situation with tons of debt, if you add them together, because it's the same person, right? I mean, that that could be that to their detriment if they're overextended personally. Correct. Okay, correct. Okay, correct. All right, step number four. Step number five, excuse me. What's that one, Brian?

SPEAKER_01: 10:14

So step number five, Gene, is the last three months of personal and business bank statements. This is pretty straightforward. We just want to see what's happening inside of your account. Because for us, we have to be able to gauge one, do you have enough cash on hand to be able to inject capital into the business for the loan request? Because with our SBA loans, we do require, we do require an equity injection. And so with an equity injection, how we look at an equity injection is your skin in the game. Have you invested in the business? Right. And so we look at your personal and business bank statements to verify and assess that.

SPEAKER_00: 10:50

Is there is there a percent of cash injection that a that you're expecting from a loan applicant, or is it just depends on a number of variables?

SPEAKER_01: 11:01

Yeah, it is it is traditionally 10%.

SPEAKER_00: 11:04

Okay. Okay, and that can be already invested in the company or could be forthcoming if they have cash that they could loan to the business at the time they apply. Correct. Correct. Okay, okay. Well, you know, I um as an aside, I'm a big believer in that the bank statements are the most powerful indicator of a business's health rather than the balance sheet in the income statement. Because the the checking account is verifying what cash is coming in, what cash is going out, and if you have a negative cash flow every month or you have a positive cash flow. So I always advise my clients to pay a lot of attention to their bank statements and not delegate it to their office manager, bookkeeper, accountant, et cetera, et cetera. All right, so step six, what is that one?

SPEAKER_01: 12:05

Yeah, so this, Gene, I know you'll get a kick out of. This is the business financial statements. This shows us what's happening present day. We're looking at historical financials, we're looking at past years. So traditionally business tax returns that have been filed for years previously. For business financial statements, which is the business balance sheet, the business profit and loss statement. We're looking for information that's current. So, as an example, if we were to receive business financial statements for this year, we'd be looking for how is your business performed from January 1st of 2025 through last through the end of last year. So November 30th of 2025. This helps us see year-to-date information. How's the profitability of the business? What's the net income of the business? What kind of liabilities are on the business? What kind of assets are held by the business? This helps us see how the business is performing in real time. Okay. These are what we call present-day financials.

SPEAKER_00: 13:03

Okay, I have a question for you, Brian. Um so uh any lending institution, including AMPAC and including your partners, has to assess whether a company is lender ready or bankable, if you want to use that term. Um, so the business tax returns and the financial statements have recorded historical activities, but not future activities because it hasn't happened yet. Now, you mentioned earlier uh a couple minutes ago about projections. So is it a delicate balance between assessing a company's lendability when you look at the historical versus the projections? I mean, I guess in uh what I'm trying to say is what if the projections are so much rosier than the historical? Are you gonna say, oh no, that's blue sky, that's not gonna happen.

SPEAKER_01: 14:10

If the projections are rosy, we know it's not gonna work. It has to be realistic, it has to be feasible. We can't work with it if it's not realistic, if it's not feasible. It's like a smart goal. It has to be specific, measurable. The key one is attainable, realistic, and time bound. We're looking at all those factors, especially with projections. And so if they're not matching up, if they're not matching up, that's where we have a gap, and that's where we all have a problem we have to address.

SPEAKER_00: 14:45

Okay. Um, all right, I get that then. Um all right. Yeah, I I don't have any comments on that, other than the fact that um uh I would advise the reader that those financial statements are done on an accrual basis, not a cash basis. And that's perfectly legal, and your tax returns and financials can be different, but that's okay. Because you'd be shooting yourself in the foot if you presented your historical performance on the tax returns to yourself, such as such as AMPACT, and you're really sort of distorting what you actually is happening with your company because you're not including sales that have not been collected, which is what an account receivable is. Okay, uh step number seven. What's that one, Brian?

SPEAKER_01: 15:40

Step number seven is the last and best step. It's called the business debt schedule. This business debt schedule showcases to us every form of debt you have on a business. So every business credit card, every line of credit, if you have merchant cash advance loan, uh traditional loan from any other lender. It shows us what the debt load is on the business. And we look at that so we can see is there any opportunity for us to potentially refinance any of your debt? Can we lower your interest rate? Can we save you money on a monthly basis? That's where we dig in and say how many debt products have you taken advantage of for your business, and are there opportunities for us to help you get out of them?

SPEAKER_00: 16:23

Well, it sounds like that's a very important step. It is, yeah, it's very important. So well, uh Brian, if you don't mind, I I'd like to add a step eight. Okay, and uh, I don't know if I get any royalties on this from you or but um in my walk, and we've already mentioned it, it's the it's the word projections, is that the projections are a document that is going to ensure to the lender that if you give me this loan, I'm gonna generate these incremental sales and income, and that number is gonna be sufficient to make the loan payment required of this new loan. But the key is as you mentioned, Brian, the projections have to be believable and defensible, they just can't be blue sky. Correct. So I encourage every applicant that if they do projections to think about it a lot, what the assumptions are based on. And then when you talk to somebody like you or a lender, you're in a position to defend them. This is why I came up with this number, etc.

SPEAKER_01: 17:43

This is the best part for business owners as they're trying to get started. When you work on financial projections in this capacity, do you know how intentionally you have to plan? How well you have to be prepared to grow this business. Yeah, it's one of the most beneficial. It's one of the most beneficial exercises of planning that you can do for your business. Even if even if you're not planning to start for another year, do your financial projections, do your assumptions. How are you gonna make your money? What is it gonna cost you? What is your bottom line gonna be? When is your break-even gonna be? These are all things that we highly recommend every time.

SPEAKER_00: 18:23

Uh makes sense to me. That's great stuff, Brian. Um, so those are the seven steps I added in eight because it's my show and I can do whatever I want. So um that's right. See, but do you mind if I ask you a few questions, Brian? Yes, of course. Okay. Um, what is the current SBA 504 loan fixed interest rate that has a 20-year term attached to it? Because I know you guys do those. What's the rate? Yes, sir.

SPEAKER_01: 18:54

So we do do two programs. We do do the 504 and 7a right now. The SBA 504 rate as of November of 2025 for 20 years is 5.92 for 25 years is 5.86.

SPEAKER_00: 19:08

Oh my gosh, you I know stand in line, go get the money. Yeah. Um now I had heard that you could then that's a 90% loan to the purchase price, but I had heard that you can actually borrow the required 10% cash as well, and in essence, get 100% financing to buy your own commercial building or facility. Is that true?

unknown: 19:36

That's correct.

SPEAKER_01: 19:38

10% out.

SPEAKER_00: 19:39

That's correct. I have this recorded, Ryan. You're on record. Assuming, of course, that it's good business, they have good credit, but it is possible to buy a building and rather than rent, own with a hundred percent. Financing.

SPEAKER_01: 20:02

Or 90% financing. You need the 10% down. That's correct.

SPEAKER_00: 20:06

You can't borrow the 10% down.

SPEAKER_01: 20:09

You can be gifted the 10% down. So it can't be borrowed funds, but it can be a gift. It can be a gift, which we prove with the gift letter. Okay. And who's the gift doors? That gifter can be anybody in your network, friends, family, angel, venture, any opportunity we can support.

SPEAKER_00: 20:31

That's cool. All right. So I would be remiss if I didn't ask you this question, Brian. How could a small business owner use AI to effectively assist them in attracting business loans for their company? Or make their business stronger?

SPEAKER_01: 20:52

This is the best, the best question, actually, Gene, because if you're leveraging AI correctly, you can get a full assessment of your business. Oh, that's awesome. Wow. You can use you, you just have to prompt AI correctly. AI, you can, whether it's GPT, whether it's Gemini, Claude, yeah, perplexity. As long as you prompt it and give it instruction to operate like a lending specialist and give it your financial, give it your information in a format that it can digest and give you feedback, that is one of the best ways to take advantage of AI. Well, you can compare your business. Give me an example of the question that you would ask AI. Absolutely. So a good question that I would ask AI AI, what is my debt service coverage ratio based on the financials of my business? That's a great example. So that you can understand that in residential real estate terms, it's debt to income ratio. So you can understand what you can qualify for based on the cash flow of your business. Simple question. AI operate as a lending specialist helping me prepare for a loan application. Based on my net income from the last three years, you put that information into a prompt. What is my debt service coverage ratio? And how much can I access in loan capital?

SPEAKER_00: 22:12

You could even ask them what is what is the definition of a debt service coverage ratio? Exactly. Exactly. Exactly. Okay. Okay. So what do they need? What do you what do what is the the business community need you and me for?

SPEAKER_01: 22:26

Well, one thing that they need me and you for is to help them interpret what they're receiving from these AI tools. I gotcha. That's the hard part. So they have the information, but you need to.

SPEAKER_00: 22:37

What about Ampac, Brian? Just Ampac as your as the business. Yeah. How has AI impacted your business model? Not your clients, but how you do business? Yeah.

SPEAKER_01: 22:49

So AI, excuse me. AI is really, really, really effective. And we are leaning into it as well. It's it's it's something that we're trying to implement into our underwriting process, into our processing process, into our sales process, into everything that we can do. Um, even in how we're fundraising, like everything or customer engagement, customer follow-up. We're trying to implement it in everything. Because in this day and age, if you're gonna use AI, you'll be ahead. If you're not using AI, you will fall behind.

SPEAKER_00: 23:24

Really? Okay. So uh let me shift gears slightly. Um, in your opinion, what are the most common reasons why a loan applicant would be turned down by AMPAC or one of your banking partners?

SPEAKER_01: 23:42

So the reality is that there are a lot of reasons why an application could be turned down by a banking partner or by us directly. The biggest one, Gene, is lack of cash flow. If we can't prove that the business can repay the loan, it's hard to make the loan happen because we see that as a harm. Yeah.

SPEAKER_00: 24:03

Uh so a loan applicant should know that ahead of time. I mean, just take a correct, just take a number and say, what's my monthly payment? And here's my monthly income. Can I handle this? Um, okay, so that makes sense. So it's a lack of cash flow, which any lender is going to assess because I mean, let's face it, um, a loan is a situation where I'll give you the money, but I'm not giving it to you. You got to give it back to me and the interest. Correct. All right. Um, Brian, does Ampac provide any other services other than just the extension of loans?

SPEAKER_01: 24:43

Yeah, of course. So AMPAC is also an entrepreneurial ecosystem. So we actually have a hub that we've created, free mobile app, Ampact Business Capital on the App Store, where you can get access to free consulting and you can be wrapped with community. We want to make sure that you have really genuine and also really relevant growth resources to your specific business. And so every time that we connect with a business owner, it's much more than just, hey, do you need access capital? Say, do you need help with marketing? Do you need help with generating new leads? Do you need help with your human resources structure? Do you need help with legal structure? And we bring you a network of service providers, business owners and companies that will help you achieve your goals based on what you need. It's about helping you find the right fit for growth, not just access to cash.

SPEAKER_00: 25:30

That's uh that's a great service. So they make one phone call and they could either get um um I guess business coaching or consulting, as well as if it morphs into a loan request, you've got the money too.

SPEAKER_01: 25:49

There are a lot of pieces that business owners don't know, Gene. It's not just about the money. There are so many pieces.

SPEAKER_00: 25:56

Oh, I know, I know, I know.

SPEAKER_01: 25:58

Even thinking about even thinking about traditional financial statement analysis versus cost accounting. That is one of the core pieces that so many business owners miss, especially when they're trying to access capital. They're top line, top line, top line focused. But that bottom line, that's where the results really come to light. And we have to help them focus on that.

SPEAKER_00: 26:22

So, so Brian, let me um um let me put my let me trade place. Let's say I'm a business owner and they're listening to this show or they're watching this show, and you say, you know, that young man, Brian, is right, but that's not my bag. That's not my field. I don't know how to do that. But you're saying is that you can also provide training for them so they can learn how to do it, correct? Correct.

SPEAKER_01: 26:56

That's exactly how we can actually say that training is accessible.

SPEAKER_00: 27:01

I think so much of the money game is that the um the applicants um are intimidated because they don't understand the buzzwords, um the process, but it's it's all trainable. Right, it's education. Just like you said, if you're gonna go to the lender, be ready. Know who your competitors are, know what your value proposition is, know what you're gonna use the money for, know what the benefits of that money is gonna bring to your company. They need to know that this can't stroll into a bank and say, hey, you got some money to throw my way? It don't work that way. Right. Never has. And it never works, it never has. And I'm I believe that's why um the turndown ratio for loan applications is so high, and that's why I invited you as a guest with your seven steps. Is that um it's not rocket science, these are the things you need to do, and if you do them well, you're going to significantly increase the probability that the lender's gonna say yes, correct, but they don't know what those are, and your organization does both. We do, and that's how we're gonna continue to do that. I'll help you prepare for your money and I'll give you the money. Yes, yes, all right, yes, so um, so Brian, we talked a lot about a lot about the money game and loans and steps. Is um is it fair to ask you some kind of summary statement to wrap all this together, which you'd want to leave with the viewers, you know, in 20 words or less.

SPEAKER_01: 28:54

Absolutely. So, one thing that I always like to leave at business owners is the biggest amazing question is that it is possible. If you believe, you can achieve one of the best things that we know about entrepreneurs is nothing stops them from getting to what they desire, which is achieving their goals and achieving their dreams. Biggest thing that you need to take away can help surround yourself with people who can help you achieve your goals. And we'll be honored to be a partner in that growth journey.

SPEAKER_00: 29:24

You're right. It's just too much for one person to be an expert on everything, isn't it? That's it. That's it. Okay. So um, Brian, what is the best way to get a hold of you as the ecosystem director, the Ampact in general? Um, what's your contact information?

SPEAKER_01: 29:47

Absolutely, Gene. So the best way to get in contact with us and stay up to date with everything we're doing is through our mobile app um on the App Store, just Ampact Business Capital. You can reach us on our website as well, www.ampak.com. Our email address is info atampact.com. And you can call us and reach us anytime via our office line at 909-915-1706. And we pick up the phone. You don't get an AI bot.

SPEAKER_00: 30:24

And he calls me and I go, Well, is this really you or an AI version? Are you a bot? Because I haven't heard from you in four years. And he laughed, and so, but that's just the uh sign of the times, isn't it? Well, anyway, thank you, Brian, for so much so much for your time. I wish you and your family uh Merry Christmas and holidays. And um the same for my viewers. Um I'll see you January twentieth, 2026. And remember, you have to plan. So with that, I'm out. Thank you, Brian. Talk to you soon, young man. Bye bye. Talk to you soon. Take care. Bye bye.