Lendio business loans
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Community banks offer more than just financing. Your banker can also connect you with a suite of services to assist in the efficiency of your business. And even provide information that could help you understand the strengths and weaknesses of your business strategy.
Ideally, you’re signing up for a long-term relationship when you take out a loan. So you should look for a banker who's familiar with your industry and can give your application — and your business — the attention it deserves.
Choosing a bank isn’t just about comparing costs. You’ll also have to consider the type of relationship you’re going to have with this provider — and how else you can benefit.
A bank is like any other supplier — but instead of providing inventory or raw materials, it provides financing and other services. Look at factors like the quality of the service, speed and reliability.
If you have a tried and true strategy for vetting other companies, consider applying it to your search for a local bank loan.
You can sometimes get a general idea of what it would be like working with a local bank by customer reviews online. Also, reach out to your network of local business owners — including competitors, suppliers and clients. Ask if anyone has used that bank and if so, what their experience was like.
If there are hundreds of mostly negative reviews or someone you trust had a bad experience, those could be red flags. Scheduling a meeting with a banker in person or over the phone before you decide to use them can also give you a sense of who you’ll be working with and how they'll treat you.
Interest rates are only one of the many costs you’ll pay at a bank. If you become a client, chances are you’ll use other banking services that come with fees, like a checking account, remote deposit or ACH transfer fees.
Interest rates can vary, and may be hard to nail down before you apply for the loan. But fees are often the same for all customers, and can be available online. This makes it easier to get an apples-to-apples comparison between the cost of working with different banks.
When meeting with a banker, ask if they have experience working with your industry or any competitors. If they do, this can be hugely beneficial to your business. They’ll have an understanding of what does and doesn’t work in terms of financing — and even running your business. And they'll be better prepared to anticipate when you’ll need financing in the future.
If they only show limited interest in working with you during the prospect meeting, you'll likely get much less out of the banking relationship than you had anticipated.
Ask how long it will take to get a business loan during your meeting. A banker who's eager to give you a loan fast might not be working in your best interest.
Legally, banks can take as long 30 days to give you an answer after receiving an application. Since you’re a new client, a turnaround closer to a month can actually be a good sign. It shows they’re taking the time to structure your loan properly and thoroughly vet your application.
Consider the other services the bank offers that your business might benefit from now or in the future. Some local banks have relationship discounts on certain products — and keeping everything in one place can make it easier to manage your business’s finances.
Almost all established businesses can find a community bank loan if they look hard enough. But to qualify with a bank that’s working in your business’s best interest, you generally need to meet the following criteria:
Taking these steps before you start shopping around for a community bank loan can strengthen your position when you apply.
The application process typically begins as soon as you hand a loan officer financial documents for your business. While it can vary from bank to bank, here’s what usually happens:
Often, your loan commitment will require you to keep your banker up to date on your business’s finances. You might be required to supply business financials on a yearly or even monthly basis during the term of your loan.
This can help your loan officer stay alert to early warning signs that you might miss a repayment — and in turn, help your business get back on track before that happens.
While it depends on the business, community banks typically ask to see the following documents during the application process:
Borrowing from a community bank can be highly beneficial, though there are a few drawbacks to be aware of.
If you're interested in borrowing from a local bank, but aren't sure where to start, using an online business loans marketplace like Lendio or Kabbage could be helpful. They both work with community banks around the country to help small business owners find financing.
You typically fill out one online form to get connected with a community bank who might be able to provide you with financing. This can give you a starting off point if you're overwhelmed by the many options available to you and aren't sure where to start.
If your business isn't approved for the loan, your bank should tell you why. Typically, you’ll receive a declination letter that explains the reasons your application was denied approval.
Often, a turn down is a “no for now.” Consider talking to your loan officer about steps you can take to improve your business so that you can qualify for financing in the future.
It really depends on a variety of factors, which might include insufficient cash flow, inadequate collateral, insufficient equity or low guarantor credit scores.
To fix these issues, you might need to adjust your tax strategy or invest more personal equity in your business. In other cases, you might need to actually slow down growth to avoid going out of business. Or you might have to face the reality that your firm is not solvent and has no other choice but to shut down.
While community banks aren’t your only option, make sure you understand why the bank thinks a loan isn’t worth the risk. Hold off on applying for other types of financing until you’ve fixed the issues that the banker cited, if possible.
Developing a lending relationship with a community bank can be a great investment for your small business. But not all community banks are created equal. When deciding on the right one for you, look for an experienced lending team that takes the time to get to know your business.
Read our guide to business loans to learn more about how financing works.
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