I don’t know how many times I have heard small business owners complain about the time it takes to obtain a bank loan, or even the time it takes to be refused a loan, but its a lot. In a recent Wall Street Journal article, Ami Kassar makes some interesting observations and answers the question: Are you to blame for your slow bank loan?
“Banks are notorious for their lengthy loan-application processes, which often take weeks to complete. Though the economy is in recovery mode, the recession made a huge impact on how banks deal with small-business loans. Banks now require more from applicants and they are pickier about approvals.
Unprepared borrowers are a primary culprit. Business owners could speed up the process with a timely submission of their up-to-date financials and tax returns, as well as open communication with bank-loan officers. By contrast, owners with outdated financials or extensions on their tax returns, and who are poor communicators, will often suffer.”
So staying current with your accounting, bank reconciliations and financial statement preparation (profit and loss account, balance sheet and statement of cash flow) is the best thing you can do to help yourself and your loan officer. Once you make timely and complete financial statements a matter of routine in your business, you are giving yourself a head start in gaining that desired approval vs. having a slow bank loan. Although there are clearly alternative sources of financing available, missing out on a traditional bank loan as a result of poor internal discipline alone can be a costly mistake.
“What this means for some borrowers is that they are pushed out of the bank-loan realm and enter into the higher-priced world of alternative lending with promised quick turnaround. The same scenario goes for borrowers who have poor credit, limited collateral or tax issues.
The trade-off: While alternative loans accommodate those who need a quick loan without much paperwork, they come at a much higher cost. With bank loans, the borrower has the opportunity to get money at dramatically cheaper rates, even if it takes a few more weeks to acquire.”
Read the full article at:
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