Having trouble getting a bank loan? Maybe, to paraphrase a bestselling book, your bank is just not that into you.
Larry Goldstick, owner of Avenue B Financial Partners, LLC in Jupiter, Fla., and author of AvenueBBlog.com has some good advice for small business entrepreneurs dealing with bank lenders.
What's the climate for small businesses trying to get loans these days?
I saw a statistic that 74% of all small business loan applications get turned down. Maybe as high as 90%. Banks are fighting over cream of the crop borrowers -- doctors, lawyers, and CPAs or companies that have been around a long time with steadily increasing gross income year after year. If you fit into one of these categories, be sure to shop around a bit, because the banks will bend over backwards for you.
What should your strategy be if you're not a "cream of the crop" borrower?
It could be that your bank is just not that into you. It is not unusual for a bank to give a prospective borrower false hope for three, four or five weeks before issuing a denial.
So if there's radio silence for all that time, what then?
Your time can be better spent finding a bank that is interested in your business or exploring alternative financing sources. Just like you don't like hearing no, bankers don't like to say it. The approval process tends to drag out, especially if the bank is going to turn you down and they don't have a solid reason.
What are some of the signs that banks are just not that into you?
If they say: Sure, let me take a look at it and I will get back to you. When I hear that, I know that the bank is not interested. After you explain your loan request, if the banker doesn't ask specific questions or show any enthusiasm or excitement, nine times out of 10, the loan will be denied.
Why would the bank take your loan package knowing that your loan most likely won't get approved?
Your guess is as good as mine, but I think it goes back to the fact that nobody likes to have to say no.
How else can you predict the bank is just not that into you?
They ask if you've switched over your accounts yet. It's a red flag if the banker is more concerned with you moving your business checking, savings and investment accounts over than the status of your loan. Never move your accounts over to a new bank until you receive an unconditional loan approval. A term sheet isn't worth the paper it's printed on, and don't rely on a verbal commitment. Loan officers are often required to bring over a certain amount of deposits each quarter. In fact, they may be more incentivized to bring over deposits than approve loans. Don't get caught up in that game.
Other negative signs?
If your loan officer stops taking your calls or takes 72 hours each time to call you back or return your emails, that's bad. If they want you as a customer, their response time should be less than 72 hours. If the bank won't issue you a term sheet, that's bad. Even though the term sheet doesn't mean much, it is an indication that the bank is initially interested in doing business with you and is optimistic that a loan will be approved. If the lender won't issue a term sheet in a reasonable amount of time or starts making excuses for the delay, start looking elsewhere.