Money In The Bank

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If you still haven't formed a relationship with your very own friendly neighborhood banker, then you'd better run--not walk--to that bank and make yourself known. Otherwise, you could really be missing out: When it comes time to get that important loan, a friendly working relationship with your banker may be your biggest advantage.

That's the word from Jere Glover, chief counsel for the SBA's Office of Advocacy, who shared with us results from the office's "Micro-Business-Friendly Banks in the United States 1999 Edition" report. The thing that stands out most about this sixth annual survey of loans of $100,000 or less, says Glover, is that although business lending as a whole has continued an upward climb, the rate of actual dollar amount lent to entrepreneurs has slowed. "This is not [as bad as it seems] for business," he says, "because we've had rather robust growth through the years [3, 4 and 5 percent]. But now, [with this year's 2.5 percent increase], it's not growing as fast."

Also, the survey's data doesn't indicate how many companies actually tried to get microloans. Consequently, Glover says it's difficult to determine if this decrease portends a looming credit crunch.

On the positive side, the number of banks lending across state lines in 1999 increased over 1998. Glover attributes that growth in part to aggressive marketing campaigns by big institutions like Wells Fargo, the bank- merger phenomenon and the growth in online lending.

But there's a darker side beyond the silver lining, because these out-of-state institutions tend to make credit-card or credit-scored loans in the $7,000 to $20,000 range, but keep in mind, these loans typically carry a higher price tag. Says Glover, "[These banks] are making lending decisions based on a fairly limited bit of information (your credit history), which means that if business owners aren't very careful to make sure their credit histories are good, they're going to be squeezed out of this market into a 'no bank's land.'"

This is exactly the kind of situation where it pays to have a relationship with your community banker, says Glover. These institutions weigh more factors when making lending decisions, which bodes better for the average borrower.

The bottom line: The lending landscape hasn't changed much for entrepreneurs. If you've got good credit and don't want a lot of money, loans are easier to obtain. However, if your credit has blemishes, it's going to take some careful digging and evaluating to find the cash you need, and it sure doesn't hurt to be on a first-name basis with your local banker. So check out the top-rated microlenders that follow. Even if they aren't located in a community near you, it might still pay to give them a try.

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This article was originally published in the July 2000 print edition of Entrepreneur with the headline: Money In The Bank.

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