Choosing a Bank to Get a Loan From
Big banks are competing for your business. How can you decide which one is best for you and your company?
Consolidation has cut the number of chartered U.S. banks roughly in half over the past 20 years, but a reduction in the number of banks has not translated into a reduction in the availability of loans for growing businesses. The application process might be daunting, but the money is there. That's partially because the number of branches has not fallen off even though the names on the doors have changed. It has more to do with the industry's economics, which have forced surviving banks to compete harder for the right to lend to small- and midsize-business customers.
Jonathan Scott, a finance professor at Philadelphia's Temple University who studies small-business financing, says the trend is friendly to entrepreneurs and business owners. In recent decades, Fortune 500 customers have increasingly moved their business away from banks and have opted to finance through their own retained earnings or with the low-risk investment option of commercial paper. At the other end of the spectrum, home mortgages have migrated to the secondary market. Credit cards have also lost some of their fizz recently, as consumers have taken advantage of home equity loans and lines of credit to pay down plastic. What is left? Almost by default, Scott says, small and midsize businesses have become a focal point for the nation's biggest banks.
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