Bankers want to lend but just like stock fund managers, banks are filling a portfolio and like a stock portfolio investor looks to fill his portfolio with certain types of stocks, commercial lenders are doing the same thing. Some focus on manufacturing or medical while others are looking for commercial real estate the list goes on. Lending institutions are investors and they look to round out their holdings. Like any good business, lending institutions also specialize in order to do a great job delivering a product. For banks, loans are their product. There are many different types of loans with different risk profiles and each lender has a formula for maximizing their investments. For example, some financial institutions have specialized on SBA lending (government back lending) others in asset or merchant based lending. Some banks are very aggressive while others maintain a conservative position. Understanding this dynamic is important because it can be the difference between success and failure. If you fail to take this into consideration you might end up with a loan but it might not be the best funding option for your business.
How does this happen? Let’s analyze it. When you approach a bank that, let’s say, focuses on SBA lending it is highly likely you will end up in a SBA loan. If you fill out a form on a Merchant Lending site you will most likely get a merchant back loan. We work with a lot of great banks and fantastic bankers they are all going to do their very best to get you the funding you need. It’s not nefarious, it is optimistic. Bankers are optimistic and are going to figure out a way to get you the money you need – to find you the best possible product that they (with emphasis on THEY) can offer you, but it is your responsibility to look at the options in the industry and to figure out what is the best option is for your business.
Borrowing money is a big decision and should not be done on a whim or without significant consideration. I talk to business owners every day that shop three, four, even five different suppliers to save a few bucks on cleaning supplies but walk into the first bank they come across and sign up for a loan. It does not make sense to put the due diligence into your cleaning service and not into your funding sources. Yes, it is time consuming and at times confusing, but perseverance is crucial. Getting the right loan can be the difference between barely surviving and financially thriving.