Small Business Loan Requests that Don’t Fit in the Box

Small Business Loan Requests that Don’t Fit in the Box

Every week, I meet with several small businesses and real estate developers/investors who are seeking financing for either their business or a real estate venture. One of the common themes of these meetings is the client’s frustration with either their existing or former bank with whom the client obtained financing from. Usually; I hear the following complaint from the prospective borrower: “I did business with XYZ bank for 25 years and I took out numerous loans with that bank and I paid back every one of those loans on time. Now; that bank won’t even talk to me or give me the time of day. My great track record with them doesn’t mean anything!

Does your business have a similar story? If so; you are in the majority; not the minority. Bank financing has become a “numbers driven” business and the pool of available capital for conventional financing for small businesses has shrunk. Small business loan requests have to “fit in the box” almost perfectly today otherwise the loan request is typically rejected.

Why has this phenomenon occurred? Since the financial world almost collapsed in 2008/2009, the FDIC and other bank regulators have increased the level of scrutiny that is undertaken on a bank’s loan portfolio thus forcing all banks to tighten their loan underwriting standards going forward. As a result of a more onerous loan underwriting environment; I am sure that I will continue to hear phrases that sound like the following: “I used to be able to call the loan officer at my bank who knew me for 20 years and I would be able to get a new loan from the bank very quickly. Now; that same guy tells me; sorry Joe; it is out of my hands; I can’t help you with this loan request. I wish that I could help you; but I can’t”


Stay tuned!