Financing for Borrowers

When borrowers ask, “What does it take to get a bank to make a loan?” my normal answer is “storytelling”. Those businesses that have always been successful and whose ownership is not changing through sale or inheritance generally have little problem getting a loan. However, most small businesses have unusual events that impact revenue and cash flow. Without a good explanation (“story”), many banks will decline a loan. A story that includes a written explanation of the business and owner, good documentation to support the explanation, and an analysis that shows the impact of the explanation may make the difference between an approval and decline.

Traditionally, a bank operated from the community and made loans to local businesses. Bankers knew every business and owner as a result of living and working in the area. Today most banks rotate their employees from one branch to another, making it difficult for bank employees to become familiar with local businesses. Adding to the confusion, most loan decisions are made at a distant regional or national headquarters rather than within the community. This makes it challenging for the borrower’s story to be told and understood. In addition, there are many banks that make loans nationwide and do not build relationships with businesses prior to closing a loan. These banks won’t meet the borrower or see the business until after the loan has been approved. Without a well-prepared loan package, it is unlikely that a business owner will have the opportunity for a face to face meeting to describe their business.

Having an experienced advocate to prepare a good story gives borrowers a better chance of loan approval. In addition, most banks consider bowling buildings to be “special purpose,” which are considered higher risk than normal retail or apartments. Many loans secured by special purpose buildings are made by smaller out of state lenders that can be hard for the small business owner to find. Ken brings relationships with these lenders that pave the way for a story to be heard.