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Five Tips for Finding Small Business Friendly Banks

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Five Tips for Finding Small Business Friendly Banks

By Caron_Beesley, Contributor
Published: July 22, 2010 Updated: March 28, 2013

If you are in the market for business financing you may have noticed that the SBA is tentatively reporting a healthy increase in small business lending.

 

However, finding the right bank for your small business financing needs can still be a time-consuming challenge.

 

So just who is lending? And what is your best strategy for finding and approaching a bank? Here are five tips to help you find small business friendly banks.

 

1. Understand the Trending in Lending; Community Banks Favor Small Business

    From city streets to Main Street, from suburbs to rural communities- big banks dominate the landscape. In fact you probably have a big bank credit or debit card in your wallet right now. But before you start knocking on the door of your personal financing bank manager, consider this.

     

    Writing for The Huffington Post, Stacy Mitchell, a senior researcher with the New Rules Project Community Banking Initiative*, sheds some unexpected light on small business lending trends. Her sources reveal that-.only 18 percent' (Source: The Only Way to Restore the Flow of Credit to Small Businesses*).

     

    So why is it that community banks do so much more small business lending than the big banks?

     

    Mitchell goes on to explain that'big banks rely on computer models to determine whether to make a loan. Because the local market conditions and the circumstances surrounding each borrower and his or her enterprise are so incredibly varied, this standardized approach does not work very well when it comes to understanding the nuances of risk associated with a particular small business'

     

    By drawing on qualitative information - getting to know the borrower, learning about the business, and understanding the local market - small banks can better assess risk and successfully make loans to a wider group of small businesses'

     

     

    To help build a picture of the most active lenders in your state, take a look at this SBA report on Small Business Lending in the U.S. which ranks depository institutions lending to small businesses by state and territory (based on most current data). This Business Week slideshow (based on SBA data) also lists the Top Small Business Lenders* of recent years.

     

    2. Seek out Certified or Preferred Lenders

      If you are looking for an SBA loan, check that your shortlist of lending institutions are either Certified or Preferred Lenders. This certification means they have a contractual relationship with the SBA and participate in the Certified Lender (CLP) / Preferred Lender (PLP) programs. In other words, they have a proven track record of processing SBA-backed loans and know what they are doing!

       

      3. Educate Yourself on the Fundamentals of the Lending Process

        Once you have your short list of banks, educate yourself about the fundamentals of business financing. Every bank will be interested in the viability of your business, its cash flow, and collateral. Take a look at this SBA Loan Application Checklist for an insight into what you will need to provide and discuss with your lender.

         

        For more information on what SBA loan programs are available and most appropriate for your needs read: SBA Small Business Loans Explaine'Availability, Eligibility and the Application Process.

         

        4. Find the Right Lender Profile for Your Needs

          Your relationship with your lender is going to last many years, so finding the right fit based on your needs will stand you in better stead at the outset and for the long term. Take your time and ask questions - find out who the decision makers are, how many people you will have to deal with, and if your bank offers regular one-on-one advisory sessions.

           

          5. Get Expert Advice

           

          It costs nothing to talk to your local SBA office or Small Business Development Center (SBDC). Each has experts on hand to help you navigate the loan application and approval process. Use these links to find your local SBDC and SBA office.

           

          You can also solicit advice from industry experts and other small business owners at the Business.gov Finance, Money & Taxes Community Forum.

           

          Additional Resources

           

          Related Articles

           

          *Note: Hyperlink directs reader to non-government Web site.

           

          About the Author:

          Caron Beesley

          Contributor

          Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

          Comments:

          For more information on small business banking, read these articles: * A Bank Alternative: FAQs About Credit Unions * Selecting the Right Bank for Your Business
          Small businesses encounter difficulties in bank loans, they have a lot of terms that small businesses can not afford. Requires close relationship with the bank. Thanks for the article very much.
          The best thing to do is to avoid banks and borrowing money if at all possible. Until your business starts making money, a loan is often the burden that breaks the back of a new small business. Borrow at your own risk!
          "The best thing to do is to avoid banks and borrowing money". Impact, It's hard to do that, over 80% new small business always borrowing money from banks! The main thing is, if you haven't got right strategy for using money, you'll have big problems!
          For more information on small business banking, read these articles: * A Bank Alternative: FAQs About Credit Unions * Selecting the Right Bank for Your Business
          This Business Week slideshow (based on SBA data) also lists the Top Small Business Lenders* of recent years.
          The post is very good
          the friendliest bank will remain for ever "the mother"... she will help you regardless of your plan, strategy, commission or other nasty things
          Great post
          As a business owner I find this article super informative. Vote for you

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