Are Banking Options Loosening Up?
I find myself meeting with bankers in the St. Louis area on a somewhat regular basis. As a responsibility to my clients, I have to stay on top of trends in small and mid-size business banking. For some time now, the common line from the local banking community has been that “the only small businesses getting new financing are the ones that almost don’t really need it.” The SBA has allowed some small businesses to attain financing, but the collateral requirements are significant and there are soooooo many companies that don’t meet SBA criteria.
But the good news is that things are opening up just a bit. In talking with an Assistant VP at a major local bank the other day, he confirmed that his bank has recently started looking at many more new deals. Until recently, they were looking at almost no new deals for business term debt or lines of credit. But things are starting to shake out a bit.
So what kind of deals are they looking at? Well, this bank is typically only interested in deals over $500k although they are more interested in being over $750k. Local and regional banks weren’t burned by these larger small business loans, it was the smaller loans of the $100k and $250k variety that generally bit them. So they’re staying away from these smaller loans for now.
Interestingly, this banker recommended going to the larger national banks like PNC (formerly National City) and US Bank for smaller deals. He stated that these banks are really filling the need for lower levels of financing, and are still lending to smaller businesses based on standard credit procedures. In other words, the computer decides if your loan gets approved or not.
At the end of the day, I think this is all very positive news for small businesses. There are a ton of small business owners who need working capital financing but have had nowhere to turn for the last couple years. Hopefully that is beginning to change.