Credit Tips – Part 3: Business Banking

By Wayne Moseley

[Parts I and II appeared in earlier issues of Connections.]

Banks have recently become a lot like the government: they continue to get bigger and they’re always looking for ways to reinvent themselves. Since we need banks, let’s look at ways to best utilize them to our benefit.

Bank loans should compliment other types of lending, so use banks for their best capabilities: checking, line of credit, expansion and marketing type loans, and quick fixes. Don’t get too entrenched with one bank, spread your business around. Use the big auto lenders with the special programs designed to sell new vehicles; they are supported by the manufacturer or provide loans at cost to move vehicles. Most banks cannot touch these programs. National mortgage companies are usually more aggressive than banks. However, some regional banks have recently unveiled unbeatable home mortgage programs designed to attract business customers. Equipment leasing makes good sense, even at rates two to three points higher, due to the write-off benefits of the lease compared to the depreciation of the equipment.

Most people reading this article have experienced at least a couple of bank mergers in last few years. Most banking customers are unhappy with the results, but they haven’t bothered to shop for a different bank to better meet their needs. These mega-institutions charge for checking, which includes a charge for deposits, and even float your money for five days (or more). How can this suit anyone’s needs? Stand up and go after what you want. A few years ago, our bank went through a merger and they moved people around until I didn’t know anyone at my branch. I made notes and went shopping, yes shopping, just like my wife does. I wanted to be appreciated, so I visited four small community banks. Two looked at me like I was crazy, because I was asking for things that didn’t fit their program, but the next two laid down at my feet. One begged for my accounts, but regrettably said, “Sorry, we can’t make that small unsecured personal loan that you requested, because you’re not a customer yet”. Well, I went to the next bank, which said “okay” within a few minutes. Their only question was, “when do you want to open your accounts.”

The point is, don’t be shy about asking for what you need or want. Talk to the branch manager. That’s right, don’t go to a bank asking an assistant for anything. Look the branch manager straight in the eye and ask them what their lending authority is and anything else you might need. Don’t forget to tell them you’re not used to a bank holding your deposits and you want immediate availability of funds. Always be positive, pleasant, and carry a smile.

Once you decide on your new bank, unless you have a large business with deposits, do not make the mistake of always sending your subordinate to the bank with your deposits. Go yourself and stay out of the drive-thru. Go into the bank and say hello to the manager by name. Ask them about their weekend or their children, this will be more important when you need that loan or special favor. It’s easier for someone to make a decision for someone they know. Even if your credit is bulletproof, this extra effort could reward you with a lower rate.

Now that you have a good banking relationship, don’t take it for granted. Keep your business checking account spotless – no returns or overdrafts, which could be reported to other lenders when applying for credit. Returns and overdraft checks signify a cash flow problem and could be a major issue to lenders. Exceptions are rare. Your average checking account balance is used to support a loan request. Applications for over fifty to seventy-five thousand dollars usually require a comparable credit reference.

Wayne Moseley has been President of General Equipment Leasing since 1987 and has many years of credit experience. GE Leasing is the largest financer of Telephone Answering Services in the United States. If you have questions or would like a free, confidential consultation, call Wayne. He be reached at 800-226-0049.

[From Connection MagazineJan/Feb 2002]