Tired of fishing around for credit? You’re not alone. Many small business owners continue to report difficulty applying for credit. In a recent report by the Kauffman Survey, 20 percent of small businesses even said they didn’t even bother applying—with the expectation of rejection. While most banks are still keeping credit locked down, we have the key to capital city. Here is our handy guide to finding the best small business bank.
Funds at First Bite: Finding the Best Small Business Bank
1) Play the field - Banks love to pretend they’re doing you a huge favor by offering these loans. Do not be fooled by these pick-up lines: you are the one making them money. Small businesses are particularly lucrative, despite the down market. Well into the recession in 2010, the CEO of Access Bank in Reston, Va., told Entrepreneur Magazine that small business loans rose from $1 million a month to between $5 and $7 million. Small businesses bring significant revenue to banks of any size. Frankly, if a bank doesn’t make a big deal out of small business, just look around the corner to find an alternative small business bank.
2) Do your research - They say love hits you when you least expect it, but unfortunately funding doesn’t work quite the same way. You have to look in the right places in order to find the right small business bank. NPR reports on a new online tool to help streamline this process. With the help of data from the Federal Deposit Insurance Corporation (FDIC), the online database Banking Grades scores banks according to their dedication to small businesses. Banks that prioritize small business loans proportionally to their deposits receive an A, while banks that are stingy to small businesses receive an F. Whether you use this tool or another method, preliminary research will trim your pool and help you make a wiser decision.
3) Make a great proposal - Show how desirable a candidate you are and banks will come clamoring for you. A comprehensive and formidable business plan will impress banks that are less inclined to take risks in the current economic climate. A great small business bank knows great opportunities when they see them, so you have to make yourself seen. To make an outstanding business plan, look for inspiration in the most unexpected places, from social media to third world countries. For bonus points, show the banks that you understand the common pitfalls for new small businesses and know how to avoid them.
4) Know your finances - It’s impossible to stress the importance of basic financial literacy. Knowing your financial state like the back of your hand is essential to every aspect of business—especially finding the right bank. To start with, banks’ foremost concern is your finances. You will have to show an ability to repay the loan with clear and realistic cash flow projections. As the banks see the value of your small business, you will likely need to compare loan terms between different offers. Finally, once you are up and running, you want to keep a healthy relationship with your lender. Staying on excellent repayment terms saves you money in the long run and leaves open the possibility for more joint ventures in the future. Once you have found the best small business bank, hold on tight, because you never know what lies ahead.