Selecting a Lender for a Business Loan
Selecting a Lender
Selecting a lender can be as tedious and
detailed a process as preparing a business plan or loan proposal. Many
business owners and potential business owners are so concerned about being
approved on a business loan that they forget the importance in selecting
a lender.
If you already have a bank or credit union
in which you have maintained a long-term relationship, it's logical to
consider that particular financial institution when selecting a lender.
Your bank that you currently use for personal and/or business accounts
is very familiar with you and your financial history. If that history is
positive, it could play in your favor. A large part of the lender's risk
is the uncertainty regarding the loan repayment. By selecting a lender
in which you already have a relationship, it can greatly reduce the uncertainty
about your and your business, putting you in a better position of being
approved for a loan. If you have a mortgage with a bank, that same bank
is probably a good place to start inquiring about a business loan when
you're focused on selecting a lender.
If you have reason not to use a lender
in which you have a current or past relationship, consider selecting a
lender who *wants* your loan business. Sources for these lenders can be
found in the business section of your local newspaper for special financing
offers. When selecting a lender in this nature, also consider searching
both the yellow pages and the internet. Lenders that are actively looking
for small businesses in need of loans often offer a quicker process of
obtaining a loan than other lending institutions.
In the instance that you are a bank customer,
consider a credit union when selecting a lender. Because credit unions
are generally smaller, you may be able to talk directly with higher level
decision makers to state your loan proposal. Larger banks tend to have
more rigid rules and processes associated with small business loans. Even
if the person you talk to regarding your business loan believes in you,
he or she may not be able to help you other than to take your information
and present it to the decision makers in writing.
Be aware of several choices for lenders
before selecting a lender for your loan proposal. Even if you feel
that your first choice of a lender will approve your loan application,
look into several other lenders before selecting a lender to provide your
loan.
1. Make sure that the lender is sincerely
interested in your business.
If you get the feeling that your loan
is "just another number," for example, it may be safe to go with your instincts
and search for a different lender.
2. Confirm that you'll receive the services
that you desire for your loan.
When selecting a bank or other lender,
be sure to select one that will provide you with the services you need.
As an example, if online banking is important to you due to its convenient
features, don't select a bank that charges for these services, or one that
doesn't offer a full range of services that will make your loan experience
easier and more convenient for you.
3. Choose a lender that "feels right" in
everything that it can offer you and your business.
Selecting a lender, and ultimately choosing
a lender, should include the idea that this is a lender in which you feel
comfortable with developing a long-term relationship. Focus on the value
of your business to the community, and what its future deposits could mean
to the bank. The lender should treat you with respect, and should respect
your business ideas.
When selecting a lender, consider
the following questions:
- Does the lender have an industry
specialty related to your specific business?
- What is the average size business in
which the lender typically approves for loans?
- What are the details of the lender's
loan client professional backgrounds? Is the lender more of a commercial
or consumer lender?
- How long has the lender been in business?
These questions to ask when selecting a lender
are important for a few reasons. Whether you patronize a large commercial
bank or a small community bank depends on the needs of your business. Major
banks tend to offer a wider range of services and locations, which may
be important if your business has the need for a variety of financial products
and services. Smaller, community banks, on the other hand, may allow you
the opportunity to work with a banker that will directly make the decision
as to whether or not to loan you the money, or may have close ties with
the bank hierarchy. This might allow the banker, or loan officer, to offer
positive feedback to the bank president on your behalf. It might also move
the loan process along much more swiftly.
When finally making your decision on a
first choice for a lender, file your application and loan proposal with
that lender. If, for whatever reason, the loan is declined, try your second
choice. Take the time needed, and be patient, both with selecting a lender
and obtaining a small business loan. Doing so will offer rewards in the
end.
Small Business Lender
resources:
|
