Questions for a Lender
Five Questions Business Owners Should Ask a Prospective Lender
By Dave Ibach
Vice President, Business Banking
For business owners, finding the right bank can be a challenging process. Here in the Twin Cities for example, there is no shortage of business banking options. And each business has a unique set of needs.
When I first meet with a prospective customer, I encourage them to ask questions to figure out if North American Banking Company will be a good fit for their needs. Just as you'd interview a prospective employee, you should also sit down with a prospective lender as you evaluate your banking options.
Here are the top five questions I'd encourage every business owner ask their prospective banking partner.
1. Do you specialize in a specific industry/what industries do you have experience lending to?
Making sure you work with a lender that knows not only your business but your business’ industry is essential. This can give peace of mind knowing how your financials compare to peers as well as being able to offer connections within your industry. Relevant advice and dialogue is also important when future business discussions take place. Ideally your lender will know the challenges you face because they have worked with fellow business owners in your field and have gone through different business and economic cycles.
2. Where are credit decisions made and who all has input?
Working with a community bank offers a business owner the ability to work and communicate directly with the decision makers. This relationship is critical to a longstanding partnership with a financial institution. Make sure you know and connect with not only your lender but other members of their team. Centralized underwriting or non-local credit committees produce challenges in getting to know your business and the local economies they serve.
3. What types of loans do you provide (ie, SBA/Conventional, Equipment, Real Estate, Working Capital)?
Having a lender that offers multiple solutions to your credit needs should be an essential part in choosing a lender. Being able to go to your bank for all credit resources, whether it is equipment needs, working capital lines of credit, owner occupied or investment real estate or other credit facilities is crucial. Using multiple lenders can take time to develop a relationship as well as that lender getting to know your business. Different stages of your business may require different lending structures or strategies and having a lender that can offer all different types should be important.
4. How will I be kept up to date on my loan status/information needed?
As with any business, communication with a lender is vital. Being able to ask questions and be kept informed throughout the credit process is crucial to a successful transaction. Knowing what to expect and when to expect it can save time and communication breakdowns. A thorough lender will be upfront with expectations and inform a borrower what is needed and when. They will also ask questions and provide feedback during the credit process, up until the closing and funding.
5. Can my business team (CFO/Controller, CPA, Attorney) communicate with you during my loan request?
A prudent business has put together a trusted team that knows all of its goals and insights. A lender should be familiar with any business’ team and work with them towards a common goal. A strong business team can be equated to a stable chair with four strong legs—for a business, those legs consist of an attorney, CPA, CFO and Banker. If any of those legs are weak, the chair isn’t as stable as it should be. Having four strong partners is ideal to allowing a business owner the ability to focus on what they do best, and that is running the day-to-day operations of their business.
Asking these questions will help determine if the bank and banker will be a good fit for your business. If I can be of service to your business, please do not hesitate to contact me.
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