I am a returning resident who started business in 2007. However, I have liabilities of approximately $500,000, which my cash flow cannot support.

My assets include two units, which I rent at $20,000 per month each.

I am also converting a six-bedroom house to a duplex, which needs a kitchen for completion.

Finally, I have a small business which I operate from my own location which can do approximately $1 million in business this year. With some capital injection (maybe $500,000), it can do $2 million to $3 million in business, which works out to $300,000 per month.

Because of some of the previous losses, I have some outstanding debts. I need some cash with a sensible repayment time, for example two to four years. Institutions have suggested $500,000 for six months, which is not practical for my situation. I need a loan of approximately $1.5 million to restructure my assets, cash flow and property titles. What's your advice? Thank you.

- DG, Montego Bay

Advice for DG comes from Maxine Cowan Brown, business-development manager in the SME Unit, Retail Banking Division, National Commercial Bank in Mandeville.

Consolidating your existing debt is a move in the right direction, as this will provide an easier way for managing your debt. From the information provided, it is being assumed that the sum of $1.5 million is the amount required to consolidate existing debts, procure titles for residential property, put in place necessary infrastructure, and for injection into business.

Debt consolidation is the right approach as it will provide an easier way for managing the debt at a more affordable schedule.

How is the renovation on your commercial property being financed, and how much is required to complete the project?

This is important as the projected income from this source will not be realised until the units become available for rent.

It is important that cash flow from the business not be used for this purpose, as it will create further strain on the business operation. You might also want to consider getting financing for the project.

Also, seek long-term financing for the development of the residential property.

To a large extent, this will depend on your age and ability to repay the loan. The title will be required to secure the loan. You might, however, wish to hold this matter in abeyance for the time being while you seek to streamline the other projects.

The outlook for your business activity needs to be good, as in a declining economy, some measure of assurance has to be given that the products and or services provided will be in demand.

You will be required to prove the viability of your business operation via the provision of financial information and projections as per anticipated business inflows.

Finally, the matter of tangible security needs to be addressed. You did indicate that the title for the residential lot is pending, but a reason was not given. Is it to facilitate normal transfer? If so, then a suitable undertaking can be arranged between the bank and the attorney handling carriage of sale.

A repayment schedule can be negotiated and generally goes up to a period of five years, and in special circumstances, up to seven years.

PURSUING A LOAN

In seeking a loan, a formal assessment is required and so it will be useful to sit with an officer from the bank to facilitate assessment of the loan. This is necessary, too, as sufficient details cannot be gleaned from the information provided.

The loan officer will assess:

Ability to repay: Based on the viability of the business, essentially, its operation currently, and what is being projected based on the injection. This needs to be substantiated by audited financial statements and cash-flow projections, or statistics on an existing account through which business proceeds are being passed.

Security: Tangible assets will be required to back the debt, such as property, for which a lien/ unencumbered title is required, motor vehicle not older than four years, life-insurance policy with cash value, at least five per cent more than the proposed loan, or deposit with a similar margin.

Email Maxine: browncowanma@jncb.com.