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A financial hardship letter explains to your creditor why you are in financial trouble and requests a specific remedy to help you through the crisis. There are different reasons for writing a hardship letter, but the most common these days are:

1. Requesting a Loan Modification or restructuring

2. Requesting a short sale to avoid foreclosure

The hardship letter is a primary requirement in the loan application process. Your loan modification attorney will ask you to submit it along with your other financial documents, so that they can evaluate your situation and present a strong case to your lender.

When writing a hardship letter for a Home loan modification, keep in mind that the lenders really want to see why you have fallen behind with your mortgage payments. It should be clear, honest, and contain just the right amount of detail. The way you write it can literally spell the difference between keeping and losing your home. Here’s how you can write a hardship letter that puts your point across and gets you the best loan modification deal.

1. Keep it concise. A typical lender can only spend five minutes reading your letter. Try to keep it to a single page; any longer and they might not have time to really read it through. Lose all unnecessary details and keep only those that are relevant to your case.

2. Get straight to the point. Start by stating the purpose of your letter (whether it’s a loan modification or a short sale), so that the reader knows outright what to expect. Basically, it should say “I need you to buy my home/restructure my mortgage/give me a lower interest rate,” in a way that compels them to find out why. You can use the succeeding paragraphs to explain it in more detail.

3. Explain your hardship. First, make sure your problem actually qualifies as a financial hardship. Your goal is to convince your bank that you have no other means of mortgage assistance, and that you can get back on track if they do grant your request. Examples of valid hardships include:

1. Loss or reduction of income (loss of employment, demotion, etc.)

2. Natural disasters

3. Illness and medical expenses

4. Death of a family member or co-borrower

5. Divorce, separation, or other legal expenses

6. Military service

It doesn’t have to be one of these things, of course. Each lender has its own standards, and the letter’s purpose is to give them a more personal look into your situation. Once you’ve established your hardship, provide details that will help strengthen your case. Make sure to tell them how you got into the situation and why it’s out of your control.

4. Restate your request. End your letter by reiterating your purpose, in slightly different words. Ideally, your previous paragraphs should explain that it’s the only way to stop foreclosure. Make it clear that you intend to get back to your regular payments once the loan has been modified.

5. Be humble. One thing you should never do is imply that your situation is your lender’s fault. Instead of pinning the blame on anyone, simply tell things as they are and leave the judgment to your reader. Finally, thank them in advance and mention that you’re looking forward to continuing business with them.

Many business opportunities come with an associated challenge. For most entrepreneurial businesses, the greatest challenge is financing the business opportunities created by your sales efforts. What are your options if you have a sales opportunity that is clearly too large for your normal scale of operations? Will your bank provide the necessary financing? Is your business a startup, or too new to meet the bank’s requirements? Can you tap into a commercial real estate loan or a home equity loan in sufficient time to conclude the transaction? Do you decline the order? Fortunately there is an alternative way to meet this challenge: You can use Purchase Order Financing & Letter of Credit financing to deliver the product and close the sale.

What is purchase order financing?

Purchase order financing is a specialized method of providing structured working capital and loans that are secured by accounts receivables, inventory, machinery, equipment and/or real estate. This type of funding is excellent for startup companies, refinancing existing loans, financing growth, mergers and acquisitions, management buy-outs and management buy-ins.

Purchase order financing is based upon bona fide purchase orders from reputable, creditworthy companies, or government entities. Verification of the validity of the purchase orders is required. The financing is not based on your company’s financial strength. It is based on the creditworthiness of your customers, the strength of the commercial finance company funding the transaction, and in most cases a letter of credit.

What is a letter of credit?

A letter of credit is a letter from a bank guaranteeing that a buyer’s payment to a seller will be received on time and for the correct amount. If the buyer is unable to make payment for the purchase, the bank is required to cover the full amount of the purchase. In a purchase order financing transaction, the bank relies on the creditworthiness of the commercial finance company in order to issue the letter of credit. The letter of credit “backs up” the purchase order financing to the supplier, or manufacturer.

Is purchase order financing appropriate for your sales program?

The perfect paradigm is a distributor buying products from a supplier and shipping directly to the purchaser. Importers of finished goods, exporters of finished goods, out-source manufacturers, wholesalers and distributors can effectively use purchase order financing to grow their businesses.

Is purchase order financing appropriate for growing your sales orders?

Purchase order financing requires you to have management expertise- a proven track record in your particular business. You must have bona fine purchase orders from reputable firms that can be verified. And you must have a repayment plan; often this is from a commercial finance company in the form of accounts receivable or asset-based financing.

You should have a gross margin of at least 25% to benefit from purchase order financing. Sellers of services or commodities with low margins, such as lumber or grain, will not qualify.

The bottom line decision for purchase order financing:

It can take two or more years to develop a profitable business. Banks generally base their lending limits on a business’ performance for the past two or three years. Purchase order financing, combined with letters of credit and/or accounts receivable or asset-based financing can give you sufficient funds to cover your operating costs, financing costs and still realize significant profits. If you qualify for purchase order financing, you can grow your business by taking advantage of large purchase orders and eventually qualify for bank financing.