Have you ever walked into a bangin’ party with the parents of kids from your school completely naked?

Ahhh, no.

Yet that is what it feels like when you are a business owner walking into a bank seeking a loan. They ask for your last three years of tax returns, last three years of profits and loss statements, last three years of balance sheets, last three of accounts receivables aging summary, every legal document known to Mankind about your company, and a two or three sheet of paper on their letterhead, called a personal financial statement. After you, or your CPA, has foraged for this insane amount of data, you hand the package to your banker and they, or rather a cadre of bankers, analyze your “metrics” to see if you are credit worthy.

Isn’t this tantamount to walking into that party naked?

And if you are smart, you would do this exercise at least three more times with different banks so you can obtain the best terms.

We created Magilla with exactly this in mind: a way for the qualified business owner to shop banks to see which is offering the best terms in a fraction of the time.

So then, why do banks love Magilla as well?

Because, believe it or not, the under five million dollar loan market is tough for them; the under one million dollar market, even tougher.

Why?

Simply put, it costs as much for a bank to close a hundred-thousand-dollar loan as it does a ten-million-dollar loan.

In its most rudimentary analysis:

Closing Costs for $100,000 loan are approximately $1,000 vs. closing costs for $10,000,000 loan are approximately $100,000.

If you were a bank and the time it took to close both loans were equal, which loans would you do more of; ones that generate $1,000. or $100,000?

Exactly.

But it gets worse if you are a bank.

How do banks find, or mine for, these loans? The days of walking down to the neighborhood bank for a loan are a thing of the past.

Banks have massive marketing teams seeking out “qualified” business owners for whom to lend money. The techniques they use are astounding: from direct mail, to purchasing catalogue mail lists, to using Dunn and Bradstreet, to purchase hot leads from companies and even cold calling doctors lawyers, dentists, and other qualified industries.

Now, would you spend that money trying to find a hundred-thousand-dollar loan or a ten-million-dollar loan?

SEE OUR NEXT POST.