banks saying no

What If Your Bank Says No?

The commercial lending process has grown more challenging for small business owners, and business bank consulting might prove to be the most successful strategy for achieving commercial loan and working capital financing improvements. Selecting a business loan expert is easily the most important step in hiring a qualified commercial bank consultant. No matter how difficult it might seem, this task must be pursued until a business owner is satisfied.

Is your bank currently saying “Yes” to your funding requests? What if they say “No?” Here are three immediate tasks for small business owners interested in finding the “best” source of commercial financing:

  • Evaluate non-bank lending sources
  • Distinguish between good banks and bad banks
  • Fire and replace an ineffective bank

The Importance of Non-bank Financing

It is essential to include non-bank sources in the overall evaluation of practical commercial loan options, so the selected small business finance expert must not only be familiar with banks but also equally capable of evaluating sources of non-bank financing (a financial strategy sometimes referred to as “Business Loans without Banks”). The business bank consultant will need to have a working knowledge of what distinguishes bad banks from good banks as well as the ability to identify effective non-bank sources that can provide small business financing services that are increasingly unavailable even from the good banks.

It should be noted that while it is likely that the thorough review of alternative business financing strategies might not be as urgent if an existing commercial bank is performing as needed by a business, there are still compelling reasons to consider other options in the event that something unexpected happens. For example, if their bank is classified as a bad bank, realistically it will be necessary for a small business owner to entertain the idea of firing their banker either sooner or later.

banks saying no

Searching for the Good Banks: The Need for Commercial Lending Experts

If it becomes necessary to replace a bank, it should be realized in advance that based upon specialized small business finance criteria, only a few banks can pass the stringent tests to be viewed as a good bank. If a small business is currently using what is deemed to be a bad bank but still needs an ongoing banking relationship, a vital part of commercial bank consulting will be the identification of at least one good bank candidate. Even though many financial experts will debate whether there are any good banks left standing, the search for them must realistically continue.

With the ongoing debate as to whether banks are really eliminating or reducing their small business financing services, fortunately there is plenty of data available to objectively confirm the sharp downward trend in working capital loans and commercial mortgages made by banks in recent months and years. But even when faced with public reporting of their actual loan activity, it is almost a sure thing that banks referred to as bad banks will have a conflicting view of the results. It does not help the position taken by banks (statements that they are lending at a normal level to small businesses) when commercial borrowers recall that during recent banking chaos banks were not the most reliable sources of information even when testifying before Congress.

Disagreements About Bank Lending Activity to Small Businesses

With widespread public reports indicating that small business financing has fallen to the lowest levels in many years, banks are simultaneously boasting about the supposedly robust level of their business loan activity. In one possible explanation for the disparity, banks might be offsetting a clear decrease in small business lending with an increase of commercial loans to large corporations.

Before completing any new financial agreements, borrowers should benefit by calling upon the business bank consultant to help them make a final call or to serve as a commercial finance expert providing them with a candid second opinion. This report is strongly encouraging small business owners to take aggressive action when determining which commercial real estate financing and working capital loan options are realistic for their business circumstances. Glaring differences such as those discussed above seem to make a compelling case for efforts to improve small business financing with the strategic use of commercial bank consulting.

What do you plan to do if your bank says no?

banking practices

Risky Banking Practices

banking practices
Many risky banking practices contributed to financial losses in the stock market before the beginning of the Great Depression. An important corrective measure was the Banking Act of 1933. This law was also known as the the Glass-Steagall Act.

Almost immediately after the Banking Act of 1933 was put into place, the financial firms began lobbying for “deregulation” of banks. Ultimately these institutions apparently decided that their cause for deregulation would be enhanced if other industries were deregulated first.

This approach gained full momentum under President Reagan. Even though banks were not yet deregulated, they began acting as if they were and the savings and loan crisis was just the first result. During the 1990s, Citicorp attempted a merger with Travelers Group that was ruled to be illegal because it combined banking, securities, and insurance activities in one company. This was a direct violation of the Glass-Steagall Act.

Instead of forcing these two companies to abandon their merger, Congress (with a lot of help from bank lobbyists) decided to abolish the Glass-Steagall Act and replaced it with the Gramm-Leach-Billey Act (also known as the Financial Services Modernization Act of 1999). Some observers refer to this date as the financial equivalent of “The Day the Music Died” in the Don McLean classic (American Pie). The rest is history. The first chapter in this new financial history book was the Enron scandal, the second chapter was subprime mortgages, the third chapter was the banking crisis of 2008, and the fourth chapter is a work in progress.

Bankers have been seeking less controls and regulations governing their financial activities since the beginning of banking time. After Thomas Jefferson served as President of the United States over 200 years ago, he spent a great deal of his time and energy trying to convince everyone that bank changes were needed. While there are different variations of this quote making the rounds because Jefferson repeated it often and said it a little differently each time, he said the following:

  • “Banking establishments are more dangerous than standing armies.”

How Can Businesses Improve Public Relations With Their Bank?

Which Way to Better Public Relations With Your Banker?

Which Way to Better Public Relations With Your Banker?

The state of business communications between small businesses and their banking institutions is effectively on life support. This is clearly not a good condition to be in, and most small business owners would change this situation in a heartbeat if they could. One potential solution to this dilemma is for each small business owner to engage in a variation of a public relations campaign in an effort to improve business communications with their bankers and banks.

This will generally involve two activities that many companies are somewhat lacking in:

  • Business Writing
  • Business Negotiating

Even in situations where there are significant negotiating and writing skills present, the use of a business public relations expert should be evaluated. After all, this is an important part in maintaining or restoring the financial health of a company!

What Are Zombie Banks?

commercial lender

Banks and Banking

Before engaging in commercial lender negotiating with any bank, it is important to determine if they are a “good bank” or a “bad bank”. A banking description that is being seen more frequently is “zombie bank”. This generally refers to a banking institution that has a negative net worth and that would not be operational if not for government guarantees or other financial support. This concept is more relevant than most bankers care to admit, so it is important for commercial borrowers to do their own due diligence when they are looking for commercial real estate loans and working capital financing.