Forums: Discussions for entrepreneurs and small business.

I`ve taken a few workshops on small business financing and I kept hearing that bankers tend to look first at whether you are a customer at their bank when making decisions about small business loans.  Is this really true or is this something that the loan officers are telling us at these presentations to increase the small business banking at their branch?

It`s time to set up our business checking account and we`re trying to decide which bank to go with.  With the above rule of thumb in mind one would set up their business banking where they hope to get their SBA loans, right?  We figure we`d choose a bank that`s a top lender of SBA loans in our area to increase our chances, since these banks would seem to be pretty active in granting small business loans. 

According a July issue of Crain’s New York, the top three lenders of SBA-guaranteed loans in the New York district (where we`re incorporating) are: HSBC, JP Morgan Chase, and Bank of America.  Does anyone have any experience with these for small business banking?  Any feedback is appreciated. Thanks!

Janet

You can secure a loan without being a member.  The SBA maintains a list of preferred banks specializing with the SBA.  Give your local SBA branch a call.

The SBA does guarantee the bank`s loan should you default, but only as the last resort.  So when you apply remember to borrow only what you need to borrow.  The bank will require you to place a lien on your residence (if you own)  in the form of collateral in the amount of what you borrow.

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Janet,

As a commercial banker (not in NY) with a fair amount of SBA experience a friend thought I may have something to add to this thread...

Your thinking is good but be assured that no banker is going to make a lending decision because you have a small business checking account opened at the bank.  They should expect that you WILL open an account with them if they provide your financing but it will not affect the decisioning.  However a banker also will likely assume that if you`ve opened your account at a competitor that you`ve applied with them for financing and will want to know the result. 

My recommendation is this...

If you do need to open your business checking account, do it where your personal account is if they offer a free small business account and don`t spend much for checks (use online bill pay if available).  That way it`s convenient for now.  Then meet with a banker from each of the three that you mentioned and find out what their application requirements and decision making processes are (interview them!).  A bank that is high on the list of SBA lenders is a good choice since they know the system and obviously have a taste for SBA financing.  Feel free to apply to all three banks (competition never hurts).  An SBA loan application package isn`t simple but you may find that a single application package may be accepted by several of the banks (although each will likely require you to sign some of their own forms).  You may even include a generic application package as an addendum to your business plan...

Good luck!  Dean