How do loans work? How are they structured? How can you get a lower interest rate? What should you watch out for? This video answers all of these questions about more.
Watch to see a simple breakdown of the different elements of a loan, plus what to pay attention to when you’re shopping for a lending partner and reviewing your loan documents.
For more information on how loans work or to talk with one of Gateway Bank’s loan officers, contact us today.
In this video:
[0:22] What is a loan, and how do loans work?
[0:58] What goes into a loan?
[2:20] What happens if I can’t make a loan payment?
[3:00] Tips for borrowers
- When and how to get a loan
- Types of business loans
- Types of personal loans
- An overview of the loan process
- Checklist of documents to submit with your loan application
- Business loan application
Anthony Martinez: I’m Anthony Martinez. I’m a Vice President of Commercial Lending at Gateway Bank.
Jim LeCheminant: My name is Jim LeCheminant. I’m a Vice President of Business Development at Gateway Bank.
James Christensen: My name is James Christensen. I’m the President and CEO of Gateway Bank. Today, I’d like to talk to you about the different elements of a loan and how a loan works.
What is the loan process like?
James Christensen: Basically, a loan is when we give you money, and then you pay us back that money plus some interest.
Jim LeCheminant: You know, when people apply for a loan, it’s pretty scary, pretty confusing, but it really is exciting to be able to get a loan and get approved and watch your business, or as an individual, get what you need.
Anthony Martinez: Here at Gateway, we try to make this process as less frustrating and as easy as possible. It’s almost from a consultative standpoint, where we try to uncover their needs, match our loan products, and build a structure that will assist them in getting the financing they need, for the purpose that they need.
What are the basic elements of a loan?
James Christensen: There’s quite a few pieces on what goes into a loan. Really, the structure of a loan is one of the most important things. It’s one of the advantages Gateway has in that consultative approach.
Anthony Martinez: There are a lot of factors that go into a loan. We call those the terms of the loan. Anything from the length of the loan, interest rates, APR, collateral. It could be a fixed or variable. That just depends on the type of product that we’re looking at providing.
James Christensen: A lot of times, people say, “Well, another bank gave me two or three covenants. What’s that mean?” A covenant might be the debt-to-worth of your company. If you have $100,000 in debt and $50,000 in net worth, at that point you’re two-to-one times debt-to-worth.
James Christensen: The bank sometimes will set a limit on that and say, “The debt can’t be more than three times your net worth.” The one thing at Gateway is, if we do happen to have a covenant on the loan, we’re going to go through it with you, we’re going to show you the formula, we’re going to show you exactly what that looks like, and really work with you to determine, “Do those covenants really make sense?”
Jim LeCheminant: We look at the history. Usually it’s three years of financial statements for your business and your personal financial statement too. If it’s strong, you’re going to get a more lucrative rate, a lower rate. You’re probably going to get better terms on the length of the loan.
What happens if I can’t make a payment?
James Christensen: You know, we understand there’s ups and downs in all businesses. There’s good times, there’s bad times. Really, all’s we look for with our clients is to have an open dialogue. We’ve always been here, we’re always going to be here to make any adjustments we need to your loan, to have a change in terms that’ll fit whatever is coming up in your business.
James Christensen: We’re your partner. We’re not the enemy. We’re not the one that, you know, if you don’t make your payment we’re out of here, or we’re going to come take your business, or we’re going to come foreclose on your building. That’s not who we are. We are here to make you successful and help you make Arizona a better place to live.
Any tips for borrowers?
James Christensen: I would go out, and I would ask the lender or whoever I’m meeting from that team how long they’ve been at the bank. I think it’s okay to ask, “Is your bank for sale?” I think it’s okay to ask if you sell any of your loans. Really, just anything you’ve thought of banking-related that might cause you concern or be a pain point for you, feel free to ask that question. If they don’t answer them to your satisfaction, that’s not the right place to be.
Jim LeCheminant: It’s best to come in and talk to us, see what your needs are. Your needs and what we can do may not always match, and we may have another suggestion or two that may be even better for you.
James Christensen: A lot of banks really try to make this process overly complicated. In all honesty, it really isn’t. At Gateway Bank, we’re here to walk you through the process, and make sure that whatever you need, your goals for the business, whatever you’re trying to accomplish, we’re going to help you get from point A to point B. We want you to be successful, and we want you to understand what we’re doing, and we want to be part of your team.
James Christensen: When you’re shopping for a loan, in my opinion what matters most is the relationship with the bank, with the banker. Does the banker get excited about what you do? Are they interested in you? The bank’s investing in you. The bank’s investing in your company.
James Christensen: It’s one of those things that’s not always measurable. It’s feel. You know, is the banker as equally excited about my business as I am and helping me take it to the next level and succeed?