“Thank you for your patience. You will be assisted by the next available representative. Your business is important to us.”
We have all had to wait for customer service in one form or another when dealing with large service businesses, but what if you heard that from banks? While banks don’t literally place you on hold very often, many banks are experiencing delays in completing their borrowers’ loan requests. With the economic recovery we are currently in the midst of, many borrowers are seeking new loan requests with their banks. Between current customer renewals and new loan requests, new borrowers’ equipment, real estate and working capital loan requests, investors buying new properties, and new development projects in need of funding, the banking market is experiencing the “perfect storm” in terms of new loan business.
These banks and lenders have one of two options:
- Screen loan applicants more thoroughly and carefully pick the best deals from them
- Put the borrowers into a queue and have them wait for their loans to get approved and closed.
Before you take a number, here are a few things you need to know when looking for new lending for your business.
1. Not all loan officers are created equally
There are actual loan officers out there, and then there are calling officers. While both are responsible for loan origination activity, the calling officers are compensated on call volume and appointment setting. They will take your loan request, often telling you that your deals looks good, only to get back to you a short time later to inform you that your loan request has been declined.
The loan officer, on the other hand, is more highly-qualified in loan underwriting and evaluation, and can make a quick assessment of your request, often while in the initial meeting at your business. They can often provide you with immediate feedback as to the level of interest their bank will have in approving and funding your request. When setting an appointment to meet with a new banker, make sure you confirm whether they are a loan officer or a calling officer. The difference will save you time and effort when shopping for a new bank.
2. Screen potential banks before you set an appointment
Don’t be afraid to lay out your current scenario with the new loan officer on the phone before you meet with them. Loan officers are taught early in their careers to “pick their battles”, or only take on new deals they know they can be successful in presenting to their credit department and loan committee. Having a thorough picture of your credit situation, reason for changing banks, historic sales and profitability, and available collateral values will save you from going down the path to approval with a bank who will end up saying “no” in the long run. Once again, a seasoned loan officer will know if your loan request makes sense and can be approved within their banks’ guidelines.
3. Qualify the bank on your particular industry or property type prior to meeting
All banks have a list of prohibited property types or loan types they cannot consider. Also, they have concentration requirements for certain loan types they cannot exceed with new loan requests. Their limitations might include loan size, location of property or collateral, property types, industry types, market concentration of customers, time in business, historic cash flow, etc. Other issues include customer types, market activity, and focus of business.
An example of this is a new loan request we recently received for a manufacturer who produces parts for the firearm industry. While the company is strong and profitable, the firearm industry customer made the loan request a non-starter with many banks. Other limitations will apply to the property type itself, such as gas stations, C-stores, bars, restaurants, bowling alleys, rooming houses, motels and mixed-use properties. Ask the loan officer if any of these factors may affect their ability to successfully fund your loan request.
4. Once you have gotten through the qualifying process, get into the loan processing queue
Although the timelines have been pushed out further within the lending industry, you still need to fulfill your requirements to fund purchases, necessary refinancing due to bank non-renewal. The key here is to keep those in the process informed of the progress and timing. Sellers of real estate and equipment will realize that ALL lenders are backed up right now, so they are more willing to extend offers out for an additional time period to meet your lenders’ timeline.
Keep in mind that it isn’t only the bank who is backlogged – so are the appraisers, title companies and inspection companies. When communicating with sellers and current banks, remember no news is BAD news for them. You can provide them with copies of the loan approval or commitment to give them assurance of completing the transaction.
While the activity level in the current lending market has caused frustration for borrowers and lenders alike, keeping communication lines open will always create a smoother relationship with sellers and existing banks.