This is the eighth in a continuing series of articles from Ron’s newest book, Getting to Yes with Your Banker, which includes 93 secrets you likely didn’t know about dealing with your banker. Presented in a Click and Clack format, from an entrepreneur’s and a lender’s perspective, the book is co-authored by Ron Sturgeon, a serial entrepreneur, and Greg Morse, founder and president of Worthington National Bank, a community bank with four locations throughout Tarrant County.
The book is packed with tips and advice about how to choose and get along with a banker, what your banker wants to see, and other valuable tips for both startups and existing businesses. Today’s article discusses loan officer authority and cheating on your banker.
One Size Does Not Fit All, Part 2
Ron: Ideally, you’ll find a loan officer who can work with you. However, it’s not the amount of the loan that’s important; it’s the size of the debt. Say you get with an officer and his authority is $100,000, and you borrow that amount. Then the next day you need to borrow $5,000. Well, now you’re in big trouble because you have to go to the next concurrence officer or go through the next level of approval. So, you have to know going into it how much authority the banker you are doing business with has. I can recall an instance where I owed $992,000, and wanted to finance a forklift costing $25,000. Because I passed the threshold of $1,000,000, a whole new underwriting process kicked in for all my credit, not just the forklift loan.
Greg: And those numbers have changed drastically. At one point, I had a $2 million loan limit. But those were different times. What I would say is that they need to have a loan officer with at least a $100,000 loan limit.
Ron: This is one of those cases, I guess, where you don’t necessarily know what the right number is, but you definitely know when it’s a wrong number. And $25,000 would be the wrong number. Because that indicates, right off the bat, that the loan officer is possibly brand new and doesn’t know the ropes and that the bank doesn’t have a lot of confidence in his or her ability yet.
Cheating On Your Banker
Ron: Having a good bank that you can rely on is important for every business and businessperson. But even though it’s important to create an ongoing, solid relationship with that lender, it’s also important to have a second bank that you can turn to.
A second bank gives customers the option of accessing money that the first bank might not be willing to loan. In today’s banking climate, with all banks being more hesitant to make loans, it’s more important than ever to create relationships with more than one bank. From the bank’s standpoint, your primary bank is the one that has your primary checking account; you’ll want to use the same diligence in selecting a secondary bank as you followed to find your primary bank.
It’s important to note that having a second bank isn’t about being able to shave another quarter of a percentage point off a loan rate; it’s about being able to get what’s best for you and your business. And at the same time, you’ll find that when banks are competing for your business, you’re more likely to get the best rates. But you don’t have to promote the competition; they KNOW the other bank is out there. If you have credibility, both banks will generally price you without your having to ask for a deal.
Next time, we will discuss ways to get what you want from your bank.
Ron Sturgeon, business owner, consultant and peer bench marketing leader, combines over 35 years of entrepreneurship with an extensive resume in consulting, speaking and business writing. Ron can be reached at 5940 Eden, Haltom City, TX 76117, 817-834-3625 or by email at rons@MrMissonPossible.com.