Taking the time to search for the right bank or lender may mean the difference between borrowing success and failure. A commercial loan officer at your bank not only provides the short- and long-term financing your company needs, he or she is a great source for information on networking opportunities, contacts and professional advice.
Unlike private investors or partners, a bank's commercial loan officer won't interfere in your day-to-day business operations. While traditional lenders do expect to be repaid, banks don't make company decisions in return for financing a new expansion initiative. They leave the business of managing the business to you - the company owner.
If your company does default on a loan, you may trash your credit history, but that banker knows your community, your industry, your market, your business, and the influential individuals who can help your business, not only survive, but thrive - even in difficult economic times.
So, a little research on the pros and cons of using various sources of capital works for you and your business in the end, delivering better rates, better terms and no strings attached as long as you stay current on payments and pay down the loan as agreed. And that's a given.
It's worth the effort to find the best source of a capital loan for the fiscal health of your company, so do the heavy lifting, talk to different sources and choose the right lender to fit your company's capital needs.
Start the Search for the Right Commercial Lender
When should you start looking for the right lender? Ideally, before you need one. When you need cash right now, there are fewer options, so start your research before you actually need a loan. Today's a good day to begin your research.
Here's what to look for in a commercial lender:
- experience in structuring commercial loans for businesses like yours;
- service and support during the development of the loan agreement;
- numerous lending options - one of which suits your business needs;
- referrals from business friends, employees and colleagues;
- lender participation in Small Business Administration (SBA) or other government-backed loan programs designed to boost local economies.
Also, ask about each lending bank's standard operating procedure for commercial lending. For example, one bank may process credit card transactions and place those funds in your business account within three business days. Other banks may complete the process in two days or less. The longer it takes to process credit card purchases the longer it takes for you to have access to your funds. Ask how long it takes for deposits to clear for withdrawal, about the average loan approval period and about web-based banking options that save time and money.
Look for a lender who wants to participate in your business' success. Working with an unofficial partner always delivers the best outcomes over the long term.
Choosing the Right Commercial Lender
Make appointments to meet with various lenders and shop around. At this stage of the lending process you're in complete control. You can walk away from any offer and take the better deal from the lender across the street so interview potential lenders.
During each interview, ask the same questions and collect the same data so you can compare apples to apples, not apples to oranges. Here are some good questions to ask.
- With whom specifically will my company work: one individual, an associate or a group of decision makers? In short, who's the point of contact within the lending group? Decisions by committee always take longer so look for a sole source who decides if your company is, indeed, credit-worthy.
- What skills and experience does the lender bring to the table?
- Will your relationship be transactional, or can you expect additional advice, guidance and support throughout the term of the loan?
- What networking possibilities does the lending bank offer?
- Is the lending organization a member of professional associations, the Better Business Bureau and the local Chamber of Commerce? Membership in these organizations indicates a good corporate citizen - a lender in whom you can have trust.
- What is each lender's approach to your company's needs? Do you feel comfortable talking with the loan officer? If times get tough, do you feel you'll be treated with courtesy, dignity, and respect? And, will the lender work with you in good times and bad?
The banker you select has the right combination of skills, experience, flexibility and creativity to craft a loan agreement to suit your business needs and your personal business style.
Grow the Lender-Borrower Relationship
Once you've made a decision, keep going! Help your banker provide better quality terms and services that benefit you and your company.
- Provide a copy of your business plan. Ask for input and guidance. Ask what steps you should take to improve the creditworthiness of your company and improve your chances for loan approval in the future.
- Provide a preliminary copy of your loan proposal. Remember the commercial loan officer at your bank may not have the final say on loan approvals.
Ask how your proposal can be improved so a loan approval committee has the information it needs to ensure you receive the capital required under terms that are beneficial to your business. If you don't have a loan proposal drafted, ask for help getting started. Be prepared to show you're a good business person and an even better credit risk.
- Ask for referrals to other businesses you might partner with, or even take on as new suppliers or buyers of your products or services.
A bank's commercial loan officer has lots of local and regional contacts so ask for help. It's in the lender's best interests for you and for others to succeed, so ask for introductions. A good lender is more than a source of capital. A good lender is an excellent source for identifying synergies between its clients - synergies that benefit both clients and lender.
- Ask about other products or services that grow your business. The lending bank you choose might offer special financing options, business credit cards, credit lines, bundled financial services and other tools to streamline routine business activity. In short, ask the lender to help your business succeed.
A good banking and lending relationship is like any other relationship: it thrives on open, honest communication, and it's based on trust. Lose the trust of a lender and that relationship won't expand. It'll contract, or simply cease to exist, so stay current on payments and build your credit by paying on time - ahead of time if your company is doing well.
Things don't always go as planned. You may lose your biggest client or a key member of your business team. When problems do pop up, go pro-active and call your lender to discuss the implications to these business problems.
Lenders - especially traditional lenders like commercial banks - don't like surprises so give your banker the chance to help you overcome problems and roadblocks.
Finally, build trust. Cultivate confidence on the part of the lender. If you pay off the loan on time, it'll be a whole lot easier to obtain another loan 12 months from now. Why?
You've already proven you're a good credit risk - exactly the kind of borrower lenders like to see walk through the front door.