How Banks Select Borrowers vs. How VEDC Lends Money to Unconventional Borrowers
The selection of borrowers by any lender can be a complicated process. Lenders consider a variety of factors when deciding to extend a line of credit to a borrower. Anything from a credit score to employment history will help a lender determine if they will approve a loan. Every lender has different requirements or standards that a borrower must meet in order to qualify for a loan.
However, banks and micro lenders differ greatly in the type of borrowers they approve for loans. A bank has a very stringent loan authorization process and will usually only give loans to borrowers that satisfy their high standards for credit approval. Micro lenders, like the Valley Economic Development Center, do not adhere to the same strict requirements that prohibit banks from extending loans to borrowers.
VEDC’s rule of thumb is credit, cash flow, collateral. We need to see two out of the three. This allows VEDC to extend loans to more unconventional borrowers that would usually be rejected by larger banks.