The Benefits of Looking Local for Small Business Loans
There are countless banks, both big and small, which offer small business loans but as the owner of a small business what type of bank is right for you? While a local, community bank may not have the same name recognition as the large national banks, local banks offer a number of benefits that can make a big difference when it comes to your small business loan.
One of the benefits of a using a local bank for your business loan is that local, community banks can provide quicker decisions and often simpler financing. In addition, local banks make the decision on whether or not to lend money on local information. Your business’ standing in the community can be a factor in your favor along with any other number of special circumstances. The local bank uses local decision-making rather than following set formulas and pre-determined checklists that larger lenders follow, where every business is treated the exact same way.
Unlike big banks with rigid, centralized authority, loan officers at local banks have more flexibility when it comes to determining what loans to approve, taking into account factors like borrowing history within the local area, a business’ success and even something as basic as the loan officer’s level of trust in the business.
A Big Picture View at a Local Level
Local banks consist of members of the same community in which you live and work. Why is that important? Because they can easily understand the benefit and positive impact your business can have on the community in which you all live. That kind of understanding can be invaluable when it comes to lending decisions. A loan officer or committee located hundreds or even thousands of miles away does not have that same kind of community perspective.
Important Steps to Take Before Applying for a Business Loan
Regardless of where you decide to apply for your loan, there are some important steps you can do to make the process easier and more efficient.
Meet with business experts (another benefit a local bank can provide) to determine answers to key questions like:
- How much money do you need?
- What do you need the money for?
- What needs to be purchased, who are your suppliers?
- What other business debt do you have?
Timeframe of Financing
- How quickly do you need the money?
- How long will it take for you to pay off the loan?
Evaluate Current Business Performance
- How long have you been in business?
- What is the current financial state of your business?
- How much collateral, if any, do you have to put up for the loan?
Another helpful tip, particularly for those looking to start a business is to write a business plan that clearly defines the purpose and vision of your company.