Definition: A loan that a business owners gets from a bank
Although many business owners who need financing will
automatically think to turn to a bank for that funding,
traditionally, the paperwork and processing costs involved in
making and servicing loans have made the small loans most
entrepreneurs seek too costly for big banks to administer. Put
plainly, a loan under $25,000--the type many startups are looking
for--may not be worth a big bank's time.
In recent years, however, the relationship between banks and
small businesses has been improving as more and more banks realize
the strength and importance of this growing market. With
corporations and real estate developers no longer spurring so much
of banks' business, lenders are looking to entrepreneurs to take up
the slack.
Many major banks have added special services and programs for
small businesses; others are streamlining their loan paperwork and
approval process to get loans to entrepreneurs faster. On the plus
side, banks are marketing to small businesses like never before. On
the downside, the "streamlining" process often means that, more
than ever, loan approval is based solely on numbers and scores on
standardized rating systems rather than on an entrepreneur's
character or drive.
You may be able to boost your chances of getting a loan by
finding a lender whose experience matches your needs. Talk to
friends, lawyers or accountants, and other entrepreneurs in the
same industry for leads on banks that have helped people in your
business. Pound the pavement and talk to banks about the type and
size of loans they specialize in. Put in the work to find the right
lender, and you'll find it pays off.