Category: Bank Attitude

Nonverbal Messages in Commercial Lender Meetings need to be Listened to with Keen Observation. A meeting with a Banker is a rare occasion and should be treated with the Preparation of a Final Exam. Most meetings start with the Banker asking you to describe your business and the need for the loan. This is always to see if you Know Your Stuff and to provide the Banker with enough information to see if he wants to waist his time in Analyzing the Loan Request. The Banker should be listening to you and should not be looking at your information or looking at his computer or doing anything except for listening to your loan request. 

If you give him any information, which you should, give him a Summary of your Oral Presentation. This Summary can be looked at by you during the meeting as an Outline to make sure you are on track to discuss or talk about all your concerns. Do Not give him a 30 to 100 page Business Plan because he will be leafing through this booklet during the whole meeting and will not be listening to you. You can give him a Detailed Business Plan after the meeting has wound down and you feel confident that you have concluded your presentation. 

The Banker should be: Number One – Listening Intently and Asking Questions Periodically. You should have his total Attention and again he should not be looking at anything, (other than your Summary), including his computer or gazing out any windows. Number Two, he should seem interested in your business and your Loan Presentation. Again asking questions to clarify any part of your presentation. Number Three, the Banker should ask you before he runs your credit but when the meeting is over and your have applied for credit he will run credit as soon as possible. Some bankers have ran credit on his computer when you are in his office but again he should ask you before he runs credit before you have concluded your presentation. Number Four, the Banker should ask you for any additional information that he needs at the end of this meeting. Some banks have a separate Application. This Application allows them to run credit and is usually proprietary to that bank. Some banks just use the Personal Financial Statement as your request for credit and run credit as soon as they have this document. Number Five, the Banker should at the end of the meeting move to the next step in the loan process and tell you what that Process is going to be like, including a timetable for a decision and a timetable for the funding of the Loan Request. 

Now just because the Banker is interested in you doesn’t mean he is your best bud. He works for the bank and will do whatever the banks wishes are, whether those wishes are open or have a hidden agenda. The real thing to look for is a genuine interest and his attention during your loan meeting. Remember to be like a Boy Scout, “Be Prepared”. I would also visit at least three banks because there is a great deal of varying viewpoints as to what is considered a good loan.

Please direct any questions to this blog or to roger@rogerschlueter.com    

  

Commercial Lenders are busy, (Playing Golf, Talking to Friends, Buying things on the Computer, Planning Vacations), and Oh Yea, Looking at Loans. 

My First Commercial Lending Job, I had a Prospect that I didn’t think was a very good Commercial Loan and I wasn’t sure how to look at the Borrower. My Superior Lender told me to, “Just Run Credit and then Turn it Down”. Thus my first lesson in How to Turn Down a Loan, just Run The Credit and if it’s Bad, Turn it Down. This is really bad when the borrower took the time to write up a full blown Business Plan or Fill Out the Banks Application and bring in all the Items Requested by that Application. 

Since, The First Commercial Loan Screen is Your Credit Report, Run Your Credit Before Applying for a Commercial Loan and See What it Says About Your Credit! If your score is relatively high, like over 700 then you have little to worry about. Their are several negative items that are not a real negative to banks and they are: Health Related Collection Items, Cell Phone Collection Items, any Small Collection or Owed Item that is a matter of Principal for the Borrower. Some people buy and sell real estate and have many Credit Report Hits on their Reports. These can be easily explained. The real problem is Habitual Credit Problems that don’t seem to ever be rectified. These are real Problems for Banks. Many Banks will even give a Commercial Loan to someone who has had a Bankruptcy if the Bankruptcy has been at least a couple of years ago and the borrower has had good credit ever since. 

Bankers and Lenders are Real People Too and they will many times accept an explanation for a Negative Credit Reported Item or Report Itself. The banker will ask you about these Items and expects you to have a ready response. They do not want to see the “Deer in the Headlights Look”, when they ask you a question about your Credit Report. They expect you to give an insightful explanation as to what happened or the situation that existed which hurt your credit. I have had many times that the borrower said he or she had good credit when asked, but in reality had the worst credit imaginable. They had to Know, they had to have gotten calls from creditors. The banker would rather have an Explanation than be blindsided with an Absolutely Terrible Report. 

What is Bad Credit? You Ask. Bad Credit historically has been a Score that is below 600. A Score of 600 to 650 is probably definitely below average but in some cases could be explained. A Score of 650 to 699 is Passable but not the Best and a Score of 700 Plus is considered Excellent. The Credit Reporting Agencies have raised the scores needed to qualify for what is considered Good. Pre 2008 a passable score was a Score of 620 or Higher. Now that Passable Score has been raised to closer to 670 and above. Most small banks and/or Community Banks have the ability to be discretionary when it comes to Credit Scores. The Large banks have a number that may move up or down but that number is an absolute. Have a Score blow the number and the loan will be declined, have a score above the number and the loan will be approved. 

Summary: always check your Credit Report and be ready to quote the Score and also to answer questions about the individual Payment History of any of the Creditors Listed on the Report.

Please refer any questions to this blog or to roger@rogerschlueter.com  

Congratulations! You have a Bank Approval for your Business Loan. Your Banker has told you verbally that your business loan was approved. They are just waiting on the Underwriter to Finish Up the Approval or Process. 

I Hate to Break It To You but “Your Loan Has Not Been Approved”. Your Loan is Not Approved Until You Sign Your Loan Documents! You should always get the approval in writing. Even if the approval is in writing, it is usually written with so many ways out for the banker and many Written Loan Approval Confirmations have a disclaimer at the end of the Letter that will say that this approval can be denied for several reasons. 

Statements in the Approval Letter:

1) Approval Contingent on the Building or Business or Equipment Appraising at the agreed upon Amount and be acceptable to the bank.

2) The amount of agreed upon Equity will be put into the project.

3) All Hazard and other Insurance will be acceptable to the bank.

4) “These Conditions are only general terms on which the loan will be extended and is not an exhaustive statement of terms and conditions of the loan.”

The Catchall of coarse is number 4, where the bank says there may be additional terms and conditions that are not included in this letter. 

The Written Approval Letter will give you some security but most will not hold up for you in Court. The letter is better than a verbal approval which for some banks is the only approval you will get. You can of course have your Lawyer call their Lawyer and pay an enormous amount of money to get an absolute approval, but this could jinx the Deal, or Slow the Approval or Loan Process Down to a Snails Pace. 

Just Remember: THE LOAN IS NOT APPROVED UNTIL YOU SIGN THE LOAN DOCUMENTS!!! 

Please address any questions or comments though the blog or email me directly at roger@rogerschlueter.com 

There are many Documents that the bank will want to see when you apply for a Business Loan. This article covers most but, He who has the money will dictate the dance.

I Guarantee you will have all your info if you follow this list for getting a Commercial Business Bank Loan!

1) History of Company or Discussion of the Who, What, Where, Why, and How of the New Company.

2) Money needed and for what purposes. Estimates and Bids from providers of Future Purchases.

3) Resumes of All Owners.

4) Personal Financial Statement for all Owners with their Credit Score Listed.

5) Personal Tax Returns for three years.

6) Company Financial Statements for three years and/or  Projected Company Financial Statements.

7) Existing Company – Company Tax Returns for three years.

8) Cash Flow Statement for First year on a monthly basis.

9) Cash Flow Statement for Three Years on a yearly basis.

10) Financial Analysis of all Past Financial Statements and Projected Financial Statements.

11) Listing and Discussion of Collateral that you are pledging for this loan.

12) Summary of Your Project that restates the reasons you need the loan and the benefit to your business. 

*** Remember to Sign and Date all Financial Documents, especially the Personal Financial Statement and the Financial Statements and Tax Returns.

*** The Bank will run Credit on all potential borrowers.

This is a Good List but No One can tell you exactly what the bank will ask for because the Documents that are provided may lead to more information that the banker wants to see. 

Please address any questions thru this blog or Email roger@rogerschlueter.com