How Borrowers Can Use Credit Risks For Their Advantage?

When lending out money, there are hundreds of things – if not thousands – the lender thinks about. From cash flow and down payment to Return on Investment (ROI,) lenders are very likely o think twice prior to giving you the required funds. On the flip side, the borrower also has to consider hundreds of things before applying for a loan.

From the lender’s perspective, credit risks are the foremost factors that determine the lending process. If you, as a borrower, are convincing enough to cover credit risks, you have got the lender’s money. It is as simple as that.

Mikhail / Pexels / Prior to lending money, lenders think a hundred times about credit risk.

Therefore, it is essential for the borrower to know the mentality of the lender. At the same time, the borrower should also know how the lender actually thinks about credit risks. Once both parties are on the same page, there will potentially be no hindrance in getting the required money. Another essential part of understanding credit risks is that it will allow both parties – the lender and the borrower – to be on the same page. In turn, they will make a deal that will be mutually beneficial for both of them.

So, the question is: How can a borrower understand credit risks from the lender’s perspective? On top of that, how can a borrower make the most out of the credit risk factor that the lender is worried about?

Rodnae / Pexels / If a borrower understands the credit risk factor like a lender, both parties can make a mutually beneficial deal.

A deal that will go a long way. In this article, we are going to explore this. We will see how a lender views the credit risk factor. And how a borrower can use this same factor for his own benefit.

Pitch the Credit Story

Lenders are more concerned with where your business has been. They are not interested in future plans or your business will go. So, first thing first: Pitch the story of your business. Explain the turnovers of your business. Tell them how much money your business made in 6 months’ time.

Andrea / Pexels / By telling the story of your business, you can convince lenders to offer you money.

In other words, you are talking about the past of your business. From your past revenues to return on investments, tell them everything. From your quarterly revenues to all profits, narrate everything in your credit story pitch.

Once you pitch the “credit story,” the lender will be impressed by the story and make a potential deal with you. Notice that you are not talking about your unattained dreams. Instead, you are being very realistic about the operation of your business. This justifies “why” you need the help of the lender.

Thus, the fear of credit risk will disappear from the mind of the lender, and you will get your required investment. So, before you go out and ask for investment, prepare your pitch – that talks about the past of your business. Consequently, you will be able to effectively use the credit risk of the lender to your own advantage.