Make Your Business More Appealing to Lenders

As the recovery limps along, small business owners looking for bank credit and loan officers assessing their applications have their work cut out for them. The main hurdles: well-intentioned but disruptive government policies and tough bank examinations. “Regulators have gotten so afraid [of] bad loans that we leave many good loans on the table,” one institutional banker who interacts with hundreds of lenders across the country told me recently. “No one ever got fired for not making a good loan.”

Despite this difficult environment, finding credit these days is possible. To help entrepreneurs work around common roadblocks, I’ve assembled these tips from experienced individuals within the lending industry:

1. Focus on lenders unaffected by recent regulatory reforms.

Banks with assets greater than $10 billion have their hands tied. Provisions of the Dodd-Frank financial reform law require them to keep up to five times as much cash in reserves as they were previously required to hold. As a result, it’s probably not surprising that they are approving only 10 percent of small business loan applications, according to the August lending index compiled by Biz2Credit, a New York company that matches borrowers to a network of lenders. The index shows 44 percent of small business loan applications received by small lenders were approved. Read More...