Financewithall

Business Loans Column

Selecting a Lender for Your Small Business Loan

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.

2. 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.