Most business owners walk into their current bank to obtain funding for their loan and walk out frustrated, even angry.  Why? 9 out of 10 times, they went to the wrong bank. The business owner believes that because they have a “relationship” with the bank, this will automatically mean approval.  Maybe. But most likely not.

Don’t get me wrong, a bank loves to see history and having a relationship provides this; however, it is generally not enough to get an approval on a loan. Here is why:  Most business owners bank at larger institutions.  So, what? Larger banks are central underwritten by a computer system in another state.  So, if you have a credit score above 680 and good income, you stand a good chance of automatically getting approved for a credit card/ or line of credit. Even on the first day you open your doors.

The problem is, most companies that have been in business longer than 3 years have some blemishes. For most, it’s a financial struggle finding your way in the beginning and your personal credit suffers. You go through personal savings, credit cards, home equity lines, etc all to keep your business going. Business owner are risk takers and while uncomfortable at times financially they nonetheless believe that if they keep going it will pay off. For some it does, for others they run out of money before they ever hit the “payout” stage.

For a larger bank that is heavily focused on credit score, the business owner is done before they even begin. For those that do have blemishes (depending on how bad), a community bank may be a better avenue.  A business banker generally has the authority to underwrite their own loan up to a certain loan size.  They will look at the totality of the loan request; however, It is their neck on the line, so they will dig more vigilantly and listen to their “gut” more frequently.

For a business owner, knowing a few key ingredients to the underwriting process is key to understanding which bank will be best suited to meet their goal of obtaining funding.