I am sure you have heard – loans to small businesses are still very hard to come by. The climate is improving, but still very challenged. Most bankers tell me they still want to lend money, but only under the right circumstances, and only to the companies that have good management and have demonstrated past business success. So it can be done. But you will need to have at least the following credentials before a banker will want to talk to you:
- To have been in business for a minimum of five years,
- Profitable for the last two or three,
- Have a Dunn & Bradstreet Paydex credit score of at least 75,
- Accurate financial statements,
- Currently filed income tax returns
- Projections that demonstrate why you need the loan as well as your ability to repay the loan(s)
- Copies of a multitude of documents including articles of incorporation or the LLC operating agreement, business license, commercial real estate lease agreement, key employee agreements, franchise agreement (if applicable), key vendor agreements (if applicable) and countless other documents. It’s a good idea to digitize this information now so you can send it electronically as needed.
If you already have a lending relationship with your present bank, that is the first and best option for renewing your current loan or getting additional financing. If you have only a deposit relationship with a bank, that is still your first and best option, as they have familiarity with you.
That said, here are the banks that made the most loans to small business (under $1 million) in California in 2010 according to the Orange County Register (http://jan.ocregister.com/2011/02/11/which-banks-made-most-calif-small-biz-loans/54624/):
- Bank of the West, San Francisco, 22,102
- Union Bank, San Francisco, 17,975
- California Bank & Trust, San Diego, 9,688
- East West Bank, Pasadena, 6,379
- Pacific Capital Bank, Santa Barbara, 5,546
- Rabobank, El Centro, 5,290
- Silicon Valley Bank, Santa Clara, 4,986
- Westamerica Bank, 4,794
- Citizens Business Bank, Ontario, 4,278
- City National Bank, Beverly Hills, 4,121
However, the above results can be skewed to the benefit of larger banks since small local banks could not possibly put up the same numbers. The local bank are sometimes more tied to the communities they serve, often know the local business owners first-hand, and have a vested interest in making loans to good local businesses. I personally have recommended clients, with good success, to Bank of Marin (contact Dan Ancheta), and Summit State Bank (contact Wayne Hoffer).
The best advice is to stay right where you are for now if you have a lending relationship that is working. If you need a new loan, or additional financing, start with the people you know – your present bank. If you are presently not “bankable” because your financial house is not in order (see above), then you have some work to do. As always, B2B CFO® is here to help.