Picking a Bank for a Business Loan
There are a number of ways to find funding sources for your company. When you are going to approach a commercial bank consider the following.
A commercial bank is one that offers traditional banking services such as business checking and saving accounts, night deposit services, investment accounts, along with term loans, equipment loans, and lines of credit. Banks operate under federal and state regulations including the FDIC. Due to this banks have considerable more restrictions when making business loans.
Although the term “Bank” is used in conversations about funding, there is a significant difference between a commercial bank and non-bank private lending institutions. These other lenders are alternative funding sources that should also be considered when you are seeking a business loan.
By interviewing a banker prior to submitting your funding request you will have a better understanding of the position they are in and if they are indeed a potential funding source for you. By having an open and up-front conversation with a banker you will also save valuable time in your search for a business loan.
Many seeking funding will submit their funding request, which is usually poorly drafted, to as many places as possible. They believe the saying, “if you throw enough stuff against the wall, something will eventually stick.” When it comes to business loans this saying is simply not true. In fact throwing your funding request around may actually hurt your chances of receiving the business loan you need.
Many looking for a business loan zero in solely on questions that have to do with the interest and terms of the loan. To understand if this is the right lender for your business you need to ask additional questions.
Bank Interview Questions:
1. Does the bank have any loan officers that specialize in your industry?
2. Is the bank suited for your size of business?
3. How has the bank’s profitability and assets weathered the economic crisis?
4. Will their time line of approving a loan meet your needs?
5. Will the bank be suitable for your business as it grows?
6. Will a personal banker oversee your loan process, or will it go up the ladder and out of reach of your personal contact?
7. What authority does the banker have in the loan process?
8. Will the same banker be there during your company’s growth?
9. Does the banker offer solutions, or is the person only adept at completing forms?
10. Who will assist you if the banker leaves for vacation, and does the substitute have the same knowledge about your industry?
11. If you have international customers is the bank capable of handling foreign exchange, or other international needs?
12. Do they offer Accounts Receivable financing if your business finds it needs cash flow assistance in the future?
13. Will the receivables already be tied to the loan, so that you cannot use them with another funding source?
14. Also, does the bank require you to do your business banking with them?
15. How long does the bank hold a deposit before your business can access the funds?
16. Do they offer any personal banking services to compliment your business needs?
17. What monthly banking fees do they charge?
When you have made your decision to submit your funding request to a specific bank, make sure that you have clear, concise, and organized information. Do not present financial data that is six months old. Make sure your information is up to date or your efforts will be completely defeated.
Your funding request is like a resume. It might initially be reviewed for a minute or less. If you are presenting a confusing unorganized picture and day dreaming that somehow you will receive a loan - stop now, because you won’t.
Picking the right bank or funding source is a crucial step. Submitting quality information that meets the need of the banker is the next step and this topic is discussed in other articles.
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