Give Your Bank No Other Choice But
To Say "Yes"

December 5, 2011 - by Business Money Today  Comments (0)

And, not just your bank either.

It is time now for small business owners to get aggressive and, like the discipline of Judo, use the strengths of these banks and lenders against them.

Let's look at some facts:

1) Banks and other lenders are not lending to small businesses, regardless if they are growing and generating positive revenue.

2) Banks are still lending - but, only to those whom they already have a solid relationship with.

3) Banks are greedy - they only go after the most lucrative opportunities - the ones that put the most money in their pocket.

So, use those facts against them to help finance and grow your small business.

We see this in sports all the time. If you understand the strengths, habits and tendencies of your opponent (those things that the opponent uses successfully over and over again) then you can plan to take advantage of those factors to impose your own will - after all, you already know what the other side will do.

There may be no way to change the fact that your new or growing business is still a small business. But, you can effect change through those other factors.

Banks want to make money and a lot of it. Plus, they want to do so in ways that posse no risk to them. So, help them out - as long as they also help you out in return.

A bank can make money simply based on the number of products that you, as their customer, has and uses.

It is called relationship banking. A simple checking account can provide the bank about a $1,000 a year at very little cost to them or effort on their part.

A merchant account with your bank can provide them 2% to 2.5% in swipe fee and processing revenue on all of your customer's credit card purchases.

Even small things like online banking and bill pay can save your bank hundreds of dollars a year as you will then be one less person that comes into the lobby - thus freeing up bank employees' time.

Banks focus on the entire relationship - they want all your business - from checking and savings to loans and investments.

Further, more then likely, you are already paying someone else for these services, but, if you want something from your bank (like a loan) - then why not pay them instead for those services?

And, once that profitable relationship (profitable for them at least) is in place between your bank and you - then, your bank will work to keep it (see fact 2 above) - which means being more willing to approve your loan requests - after all, they don't want to lose that relationship and all that easy revenue.

As a commercial lender for nearly 10 years, we always looked at the entire relationship when approving loans to see how much in overall profits a business was providing to the bank. And, I can guarantee you that we always approved marginal loans or at least studied the deal searching for a way to get it approved from business customers that provided the bank with lots of opportunities to make steady revenue.

Now, if your small business is seeking capital from a non-bank lender, you might not have an opportunity to build a complete banking relationship. But, there are other ways to entice them to say yes to your loan request.

You just have to make it very profitable to them (works with banks as well).

Let's Examine:

Let's say that you determine your small business needs a business loan of $200,000. But, you know that you don't need all that money right now.

So, the first thing you do is lower your loan amount request - say to $100,000. This makes your loan deal easier to get approved which also will require less time and effort on the part of your loan officer (they like that).

Second, you overload the collateral. Let's say that your bank wants collateral of at least 80% - which means collateral with $80,000 in value. But, when playing to their greed (see factor 3 above) - double the collateral - to $160,000 in value.

Why not? You believe in your business don't you? You want the loan don't you? So, it should not matter. What this does is not only play to the greed of the bank but also reduces their risk - both of which can easily lead to that sought after yes.

Lastly, in playing to their greed, forget about the interest rate. Most borrowers will kill their own deal because they think the lender is charging them too much. So what? Getting the lowest interest rate is not your goal. Your goal is to get the loan and grow your business.

Further, interest rates on short-term loans - loans less than five years in term really do not matter all that much.

Example: In our scenario, the difference between an interest rate of 10% and one of 15% for that $100,000 for 3 years is only about $240 per month. Not to bad for a $100,000 business loan.

And, are you going to let $240 per month stop you from growing your business or let it stop your hundred thousand dollar business from becoming a million dollar business?

The end goal is to simply use the predispositions of banks and other lenders against them. Play to their tendencies. Make your deal that one deal that they just can't say no to.

After all, you, as a great entrepreneur, aren't really all that focused on the short-term (like your bank and your competitors) - you do what is right and focus long-term and that long-term focus means building and growing your small business into the large business of your dreams.

And, with that long-term focus, this small loan over this small time period in the long life of your business is not the end all it might appear right now - but it is simply a small stepping stone on your path to success (one small stone in a path of many).

Thus, go ahead and work the deal of the century for your bank - its really does not matter in the grand scheme of things for your business but it will give your bank or lender no other choice but to say yes to your business loan request.

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