A Guide To Choosing A Reliable Bank For Business Loans


Most people do not rely on bootstrapping their business and are on the lookout for supportive lending institutions that can provide financial assistance to raise capital. Whether you need to buy machinery, pay your staff, put a market plan in place or rent an office, you need cash. If you do not have the resources to procure the investment for your business, it is best to turn to loan operators. Whether, it is a simple business checking account or a line of credit, finding the right lending institution becomes vital for the sustenance of your business.

Critical questions before choosing a lending institution
What is the value of your project?
How much money is needed to fund the project?
How much money is needed for a loan for the project?
What will be the repayment period?
Can your business afford to repay the loan?
Do you have collateral against the loan amount?

Answering these questions can help identifying the right bank, financial institution, merchant service provider or other private lenders.

Can a bank help with business loans?
Banks in the US are active lenders. Approaching the local community bank is the best way to start while applying for a business loan. They have the local knowledge and provide useful advices on how to secure the right finance for your business. The easiest way to know if the bank will approve your loan is to check on the FDIC website that offers latest financial information on the bank of your choice. Check out the performance and condition ratios of the bank. Any well-capitalized bank will require more than 10 percent of total risk-based capital ratio. The higher the ratio, safer is the bank financially.

Selecting a bank for loan
Before selecting a bank as a lending institution for your company it is best to forge a relationship with the bank by opening an account with the bank to experience their customer relations. Check out business news to find out which bank is offering loans to your type of business. Some banks may offer good loan schemes while others may have strong customer deals. Find the right balance between the two to ensure you are in safe hands. Shop around a little. Talk to three to four banks before you zero on one. Take the assistance of SBA and economic development groups that can help you get better loan terms.

Five C’s that a bank considers:
Any bank will be eager to consider the five C’s before offering a loan.
Character talks about how you manage your loans.
Credit capacity speaks of your financial position and how strong are your personal finances.
Collateral is about the assets you have on hand that will be the primary source of repayment in case of default.
Capital constitutes bonds, stocks or immovable property you own that can be turned into cash if needed.
Confidence of your business plan is related to your projections.

Before choosing a bank, remember that each bank is different when it comes to interest rates, repayment terms, collaterals, customer relations, etc., hence make a wise choice.

Read also Funding Opportunities For New Business Ventures

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