I often joke with my banking friends, “The only time you lend money is when a business doesn’t need it because if they show that they need it you won’t lend to them.” This isn’t totally true but more often than not it seems that way. Doesn’t it?
What is important in this statement? The word “need” because that word has to be put on a balancing scale.
Last month we talked about the “Five C’s” of lending: Character, Cash Flow, Collateral, Capitalization, and Conditions. A business owner should know these and if they are wise, they access the services of a good CPA or business advisor, minimally, to discuss a plan to fulfill these categories. Applying for a loan then becomes a ‘shoe in’ vs. a crap shoot.
Another suggestion: Sit down with a commercial loan officer at a bank and ask them, “What do I need to do to get myself bankable?” Nine times out of ten I ask business owners approaching me for help, “Did you discuss what you need to do to qualify for the loan?” the same answer rings loud and clear: “No. They just turned me down.”
My friends: How does one fix something if you don’t take the time to find out what is broken? Please know too that some things are just obvious (i.e. you’re losing money or your sales are just plain drying up, etc.). These are no brainers. However, it’s not always a no brainer situation.
That said: Have this conversation! A loan officer wants you to build a working relationship with their bank, rather than seeing you leave. It’s ‘FREE’ and it’s right from the horse’s mouth so take advantage of it.
Your best option? Know why you are being turned down and if you can find someone to direct you to the right source, do it. If you don’t then I can promise you that you are in for nothing but frustration and the loss of the one thing you cannot replace: Time. If you get caught in this loop then hope that you don’t run out of money!
Although we hear of successes coming about, “…because I talked to the wrong bank first,” the number of people that don’t get financed far out numbers those that do. So, be smart and talk with the professionals available to you.