Submitted by: Megan Donnelly, Founder and President, Quabbin Advisors, LLC

With the economy showing signs of improvement, many companies are now turning their sights toward the bank market.  The question remains, however: Are banks lending?  The answer, unfortunately, is “It depends.”

Despite the financial crisis, Fortune 500 companies have had little trouble accessing financing, but smaller companies, particularly those under $500 million in revenue, have faced more difficulty.  While there are signs that banks are increasingly willing to lend to this segment, structure and pricing can still be a shock compared with the easy terms from 2006 and 2007.

If you are a CFO or treasurer and have been frustrated by recent conditions in the bank market, it might be time to put on your marketing hat, change your perspective, and….think like a banker.  Just as it pays to understand how your customers think, it also pays to understand how your bankers think – and it may just improve the chances that they’ll want to do business with you. 

Below are some tips for working more effectively with your banks.  Following these tips could make your credit process easier and faster.

  • There are two broad decisions banks make when they extend a loan:  a credit decision (will they get repaid) and a return, or business, decision (will they make money).  Scoring well in both areas improves your odds of getting the loan you want. 
  • Banks do not have a limitless amount of money to lend, so you are, in a sense, competing with other companies for loans.  It pays to know what information banks want to see – and to provide it.
  • Prepare early – banks are conducting more due diligence and credit decisions are taking longer, so give yourself plenty of lead time to get your deal done.
  • Compile detailed financials on your company.  Provide the banks with projections, including cash flow projections and a few different scenarios – one of which should be a downside case.  Banks want to see evidence that their loan will be repaid, even in a downturn.
  • Conduct due diligence on your own company.  Identify the business and industry risks your company faces – and be prepared to talk about how your company has mitigated those risks.  Prepare detailed information on products and services, supply chain, market share assumptions, operating leverage, and financial leverage. 
  • Know how you stack up against your competitors – because your bankers will certainly do that analysis.
  • Do your homework on current market pricing and structure for loans to companies like yours. 
  • Know the full scope of bank products and services that your company is using – and how much, in total, you are paying to your banks.  This could help you negotiate pricing on your loan.
  • Finally, read all credit documents carefully.  Because of financial regulatory reform, some banks have changed the “boilerplate” portions of their credit documents.  Don’t assume you know what’s in there.

Bankers do want to make loans – so do everything you can to make your company easy to lend to.

Megan Donnelly is the Founder and President of Quabbin Advisors, LLC, a financial advisory firm specializing in helping corporations and non-profits access funding and improve bank relationships.  Please contact Megan at