Consider these 6 points if trying to get more bank financing:

Of all the different types of lenders and investors, banks are by far the most familiar to business owners. Even so, there are several things entrepreneurs should understand about commercial banks that can directly impact their ability to obtain bank financing.

1. Many banks serve your market.  There are more than 400 banks and credit unions with at least $5 billion in assets, making them large enough to provide meaningful commercial loans. Yet many business owners become fixated on only a handful of banks. In many markets there are well over 20 banks actively serving each local market. In larger markets there are even more.For example, in Texas and Georgia we personally know of over 45 bankers in each market seeking to serve those markets.
2. Not all banks will give you the same answer. This is why the first point is so important. After speaking with a few banks, many business owners conclude that every bank will reach the same decision. That's simply not true. Some of our greatest financing project success stories—and the growth stories that followed—came after 20 or more commercial banks had said "no" to the Company’s original loan request.
3. Banks prioritize risk management over loan growth.  Because lending margins are relatively thin, banks cannot afford significant principal losses. As a result, an incumbent bank may be reluctant to expand an existing credit facility, while a competing bank may be more aggressive in pursuing new business. One effective way to turn your current bank's "no" into a "yes" is to obtain a proposal from another lender. Faced with the possibility of losing a valued customer to their competition, incumbent banks will often reconsider or match competing terms when another bank is willing to finance the transaction.
4. A "yes" or "no" may have little to do with your company. A bank's lending appetite is often driven by internal factors that have nothing to do with your business. These may include available lending capacity, concentration limits, prior experience in your industry, portfolio strategy, or credit policies unique to that banking institution. A rejection from one bank should never be viewed as a rejection from the market as a whole.
5. Banks will compete with private credit. Private credit lenders generally charge higher interest rates but are often willing to provide more capital and greater flexibility than traditional banks. However, banks will occasionally compete with private credit when they want to win a strong relationship, offering a significantly lower cost of capital. It can also be advantageous to have a private credit proposal in hand. You can confidently tell a commercial bank, "We have a financing option from another lender, but before moving in that direction, I wanted to see what your bank might be able to do." That conversation often generates greater interest and more competitive terms.
6. Deposits matter. In today's market, banks place a high value on operating deposits. As a result, obtaining a new loan is often tied to moving your deposit accounts and treasury management relationship. If the financing is critical to your company's growth plans, be prepared to move your banking relationship as well. While changing banks may involve some short-term inconvenience, the long-term value of securing the capital needed to achieve your company's objectives should outweigh the temporary disruption.

To summarize: bank financing can be far more competitive than many entrepreneurs realize. A "no" from one bank rarely reflects the entire market. By approaching bank financing strategically and creating competition among lenders, business owners can often secure better terms, more capital, and a stronger long-term banking relationship.

To learn more about achieving bank financing, contact Us At Lantern Advisors