The process of getting a loan involves asking and answering a lot of questions. The right answers to the right questions can bring clarity and confidence when you approach a lender about financing or refinancing. Here’s what you should be asking.
Do you have a clear vision?
As a key leader, it’s possible you have a clear vision for your organization, but does it match what others see as your vision? One way to find out is to bring the topic up at a staff meeting. Ask each person to write down your organization’s vision. You may be surprised at the results of this simple poll, and perhaps compelled to spend some time clarifying your vision. Once the vision is clear, you can build a budget that aligns all your resources and your team’s efforts to that vision.
Have you explored all your options for funding your vision?
This is actually a polite way of asking, “Should you be considering a loan right now?” A lot of the “reasons” lenders hear from potential borrowers are actually arguments against getting a loan, such as:
- To bridge poor fiscal practice
- To turn negative trends around
- To speed up reaching your vision
- When you haven’t exhausted every funding resource
- If you have no skin in the game
- When you have to cut ministry
Each of these “reasons” can reflect an unhealthy financial position that you need to address before seeking financing.
If a loan makes sense, have you positioned your organization to qualify for one?
Especially since the Great Recession, lenders scrutinize organizations very carefully to determine whether they’re financially healthy. They’re looking for good answers to questions like this:
- Does your leadership demonstrate sound fiscal management?
- Can you repay the proposed debt without cutting into ministry?
- Do you have sufficient collateral to cover the debt?
To answer these questions, lenders will drill down on your financials, paying particular attention to metrics like these:
- Debt servicing ratio (DSR)
- Salary expense ratio (SER)
- Debt service/salary ratio (DSSR)
- Debt service coverage ratio (DSCR)
ECCU’s ministry lending specialists can help you evaluate your organization’s financial health and explore lending options.