Even in a tough economy, there are many entrepreneurs out there who have great ideas for businesses that can benefit their communities and provide a great product or service to potential customers. If you’ve been thinking that you are ready to make your small business dreams a reality, and ready to become your own boss, one of the first things to consider is financing your business. Finding the right place to do your small business banking is critical to the success of your company, so here are a few tips to help you identify the commercial bank you want to work with.
Community Bank or National Bank
With all the consolidation that has occurred in the financial industry since the recession began in 2008, the landscape today is dominated by large national (and international) financial institutions. You can probably find several dozen of them just driving down the street, but when it comes to lending, they may not be your best bet. In fact, big banks often have a much lower percentage of loans made to small business than community banks. The reason? Big banks use high-tech computer models to predict the success of loans, and often the programs cannot take into account local market conditions and other circumstances that a community bank will understand. Because of the nuances of local markets and entrepreneurs’ ideas, a standardized system for identifying who to lend to can quickly become ineffective.
Certified or Preferred Lenders
A small business banking institution that carries the designation of Certified or Preferred Lender is one that has a contractual relationship with the Small Business Administration (SBA) and participates in their Certified Lender (CLP) or Preferred Lender (PLP) programs, so they know about SBA loans and can help you get the right one.
No business owner, especially a new business owner, wants to go into any contractual financial obligation blind. It’s important that you take time to sit down and learn as much as you can about the commercial lending process. The right small business bank partner will have staff members who can discuss all the different programs available and help you understand some of the benefits and drawbacks of each type of program so you get the one that best meets your individual business needs.
Be sure that as you are working with the bank, they are willing to answer all your questions and educate you about every step of the process. You should expect a long-term relationship with your lender, so they need to take the time up front to start building that relationship.
Finding the right financing for your new business venture is laying the groundwork for success today and long into the future. Having a partner that you can work with to get your commercial lending in place is important so you can focus on developing your products and services to attract customers and build a successful venture.