Bank finance articles and tips

Imagine this scenario. As a small business owner trying to keep your company above water, or even just trying to start a new one, you go into your local bank looking for a line of credit or a small business loan. The loan officer reviews your business assets, credit score, and credit history. He tells you that you need to pledge your real estate holdings and half of your inventory. Reluctantly you decide to go forward because you think there is no other way to get the loan with out putting up collateral. Unfortunately your business hits a snag and within a few months you are no longer able to make the payments. Now you are unable to make the payments and the bank has a lien on your assets. What happens? Your business is no longer able to survive.

So, what can you do to make sure this doesn't happen? Well your biggest mistake was deciding that it was necessary to put up collateral in order to secure a loan. Instead of timidly agreeing to pledge almost all of your assets, tell the loan officer that not only do you want an unsecured loan, but if you are not given one that you are going to take all of your business, checking accounts included, elsewhere. Chances are an apology will be forthcoming, he will undoubtedly take you more serious, and you may even get the unsecured loan you were looking for.

While it's true getting a mortgage right now is difficult, due to plummeting home values and sky rocketing foreclosure rates, securing a small business loan isn't because banks find them safer and more attractive than mortgages. Though you may feel vulnerable because the economy is down and your company is struggling, the banks you are trying to lend from are in the same situation, if not worse, and need to find ways to increase their revenues. And part of how they increase revenue is making loans that they can collect interest on. So, when dealing with banks do not let them have the high ground. You have much more leverage than you think.

When involved in a negotiation one of the worst strategies a person can have is negotiating from a position of weakness. Banks will have you believe that in order to get a loan from them that you have to meet all of their very strict conditions. Don't believe it. The best thing a small business owner can do is explore all of their options. Do the research. Try to find the best deal available to you, and if you don't have time to do the due diligence there are plenty of websites that will do it for you. As long as you're thorough and prudent you should never have happen what happened to the person in the example at the beginning of the article.

By Christopher Michael Heath
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