Is It Difficult To Apply For A COIC Loan?

It’s not difficult, but any business loan application requires some paperwork, including tax returns, business and personal financial statements, project cost estimates, and a written description of the business and the new project (see Loan Application for details). Start-ups are required to have a business plan, including monthly income statement projections for the first year. Once the COIC loan officer has a complete application and has completed a loan write-up, the package goes to the COIC Loan Committee for review. If recommended by the committee, the loan goes to the COIC Board of Directors for final approval. Loan funding is usually within a few weeks of Board approval, although it can be sooner in some cases.

What Do You Look For In A Loan Application?

Here’s what we look for with an existing business:

  • A sensible project and a history that indicates the ability to repay the proposed loan
  • A reasonable level of existing debt
  • Adequate cash resources
  • A reasonable level of personal debt
  • Strong management and industry background

For a start-up business, here are the main factors:

  • Adequate cash resources for the down payment
  • Other personal cash resources for unforeseen problems
  • Strong management and industry experience
  • A sensible business plan showing the ability to repay the loan

Are Personal Credit Reports Important?

Your personal credit report must be satisfactory, so negative items need to be explained. Some negative credit report items, such as a bankruptcy within the past 10 years, may disqualify your loan application. Also, you will need to explain any arrests or convictions (other than traffic tickets). A recent arrest or conviction, or a history of arrests or convictions, may disqualify your loan application.

What About Collateral For My Loan?

Collateral is secondary to the other factors. Collateral for the COIC portion of the project is typically a subordinate lien behind the bank loan. Off project collateral (such as a 2nd mortgage on a personal residence) may also be required.

What Is A Typical Loan Structure?

~ For purchasing a building or equipment for an existing business

The typical structure is 10% cash from the business owner, 50% from the bank loan, and 40% from the COIC loan. If the business balance sheet is strong enough, equipment can sometimes be 100% financed – 50% from the bank and 50% from COIC. In some cases, COIC can fund smaller projects without a bank companion loan.

~ To to fund a new business

The typical structure for a start-up loan is at least 25% from owner cash, 40% from a bank loan, and 35% from a COIC loan. In some cases, COIC can fund small start-up projects without a bank companion loan, but a 25% minimum down payment will still be required.