Borrowing in the Credit Crunch

... From Biz2Biz NWA February 2009

By Janie Pritchett-Clark

Let’s say business is good, but you’re waiting on checks from clients before you can meet your expenses. Or maybe you have a tremendous opportunity to expand into new markets, but don’t have the cash you need.

These are prime times when negotiating a line of credit from your bank is a wise decision. But what about now? Borrowing in the credit crunch has us all in a stir. Can you approach your bank with your credit request?

“While many bankers are fearful and uncertain in today’s financial markets, small business owners have the need to continue running their business as usual,” says Jayshica Amargos, VP, Commercial Banker with Arvest Bank.

“Times are definitely uncertain in the lending environment; however, most banks including Arvest, continue to serve their clients even in these difficult times.”

Yes, bankers have become more strict in their lending practices. However, credit is still available for creditworthy borrowers, although possibly with modified terms such as higher interest rates. There are several things that small business owners can do to secure a business relationship and funds from a bank during a “credit crunch.”

Borrowers should take the time to understand the lending market of today so that they are prepared to discuss their needs with their banker.

Here are tips that will help you in working with your bank:

1) Have a business plan or a marketing plan to help you overcome and stay ahead during difficult economic times. Your lender will appreciate and admire your leadership, commitment and competency.

2) Find a stable bank with a sense of “relationship banking.” Look for a bank that specializes in business loans and a banker who has the expertise in special programs, such as SBA loans. Borrowers can fall into the trap of accepting a loan from any lender because it is available. However, you and your company will be better off by taking the time to find a lender that will work with you and get to know you and your business, rather than a transaction banker who may want to break up at the first sign of trouble.

3) Keep your credit in good standing. Most banks want to see credit scores of 660 and above. Borrowers should also obtain a copy of their credit report each year to keep up with their credit
activities. This will help to avoid any delays or a denial. While applying for a loan today can be an uncertain task, taking these steps should make the road a little less bumpy and improve the odds that your company will get the financing that it needs.

4) Borrowers shouldn’t try to tackle these uncertain times on their own. Speak with the trusted banking professional on your business team.