SBA Loans, Lines of Credit and other Financing for Small Businesses – Choose Local Community Banks

Getting an SBA loan, financing, lines of credit or other business loans for small businesses sounds like a simple affair.  Just walk into the nearest big name national bank and apply.  The same bank that airs many commercials on television proclaiming that the bank is helping America’s small businesses grow by offering them business loans and lines of credit.

The thing is, that they do make plenty of loans, but primarily to very large ‘small businesses.’  This leaves virtually 99% of small businesses out in the cold.

But wait, the friendly person at the big name national bank says that a business loan is an easy thing to get.  Is that really the case?

Can we decode what they say, so we can know what is actually going on with the loan application?

Yes, we can.  Let’s peel back the process of getting a small business loan approved to get an understanding of how it works.  This information will help you to choose a bank that is going to be more likely to give you the loan that you need to grow or start your business.

What to watch out for:

Going to big national bank will lead to a higher likelihood of getting strung along for weeks before being finally told that they will not be able to fund a loan for you.  Why would you get strung along for weeks? Simply put, the underwriting committee is a group that you will not interact with.  This is important, because It is the underwriting committee that makes the ‘yes or no’ decision on the loan application, no the bank representative that you are talking to.  At at large national bank, the underwriting committee might not even be local, it could actually be clear across the country.  This is a problem in situations where understanding the local market impacts the likelihood of the loan approval.

Getting back to the bank representative that you would be working.  That  bank representative is at best, a direct liaison to the underwriting committee.  But more likely, there will be one or more bank employees in between.  The bigger the bank, the more people that will be in between the underwriting committee and you. When that is the case, it will be a slower process, and there will be messages getting lost in translation.  This means more miscommunication and other avoidable problems that lead to delays and significantly increase the chance that the loan will be denied.  In the meanwhile, the bank representative that you are working with will be most likely in the dark regarding the status of the loan application since they are so far removed from the underwriting committee.  As such, all they can offer you is blind reassurance that things are in the works and the loan is still on track for approval, even if it may be going nowhere.

What does this all mean?  In short, working with local community banks is likely the best bet to get financing for your small business.

Here’s how a local community bank can be a better source for small business loans and financing.  Number one, you will be much closer to the underwriting committee. which is going to be local, so they will be able to factor in their understanding of the local market to help approve your loan for the appropriate amount. Number two, because there are fewer bank employees between you and the underwriting committee, you will get a faster answer, which means you’ll get the money sooner, or be able to shop another bank for a loan sooner.  Either way, you benefit, as wasting time is bad for business. What you may have to do to get the best possible rate on a business loan or other financing from a small community bank is to open checking and/or savings accounts there, which may mean switching from your old big national bank. This can be a real pain if you have a lot of accounts linked to it. But it can be a small price to pay to actually get financing and to get it quickly.  It may also offer the benefit of better service.

For assistance with selecting a bank to obtain financing, lines of credit or other business loans for your business contact our office.  You can reach our Client Care Manager Sonia Chhabra at  (888) 926-9193 or email cs@justelementary.com