By Anna Colton, Bank of America
Small business lending numbers released by Bank of America in February painted an improving picture of the small business economy. As small business success is a good indicator of larger macroeconomic trends, this indicates an upward trajectory for our economy as a whole.
As the economy continues to improve, small businesses are increasingly able to secure loans for growth and development. In fact, last month, only 4 percent of small business owners said all their credit needs were not met in January, the lowest rate since early 2008, according to a survey released last week by the National Federation of Independent Business.
Yet even as lending rates rise, the question of growth for many small businesses is tricky. While many small businesses would like to expand, they are hesitant to take on the associated risks, and they don’t know where to turn to for answers. Many feel the need for greater financial literacy in running their business and are looking for expertise and guidance in this area.
A sustained, strong relationship between a small business and its banker can lead to more personal service, but it can also allow the small business owner to obtain important advice on financial products and solutions from a source with which they might not otherwise have contact. In fact, Bank of America’s most recent Small Business Owner Report indicates that small business owners who meet their banker at least three times a year are more optimistic they will increase revenue over the next 12 months.
Asking the right questions shows you’re smart and careful about business decisions. The following four suggestions are meant to help guide small businesses in the right direction when reaching out to a lender.
Does your bank have a small business division, with dedicated lending experts?
Before diving into the specific needs of your small business, it is important to first make sure the bank from which you are requesting a loan specializes in small businesses or has a division that does. This will make sure your banker can tailor solutions to your specific business needs. Does a bank tout its personal connections? Have they put emphasis on hiring small business bankers in the recent past? Are their experts working in the same neighborhood you do? Do they have bankers that will come to your place of business to assess cash flow, credit, investment and cash management needs? These kinds of services will help immensely to manage day-to-day operations and ultimately achieve business success.
What experience does your bank have in your industry?
Any potential banker should be familiar with the state of your industry and offer resourceful financing solutions to help you stay competitive. If growth is your focus, they can also help you balance the associated risks to lead you on a path to success. The amount of experience they have in your industry can indicate how willing a banker is to go above and beyond for your business. A revealing question to ask is if the banker has other customers catering to your same industry and what types of success they have had. A reluctance to share references from existing small business clients is a warning sign. Ultimately, the small business banker should be equipped to match your business with the best products and services, which could include payroll, 401(k) plans and credit cards exclusively for small businesses, as well as merchant services.
What procedures are in place to protect my funds from fraud and mismanagement?
Small business leadership is being pulled in every direction at all times, so it’s a real sigh of relief when someone has your back when it comes to defending against fraud and mismanagement. Managing risk is something your small business banker can definitely help with, so put your mind at ease and open up the conversation.
On the flip side, does the bank have questions for you?
The relationship between a small business owner and their banker should be a close one, and a two-way street. If the banker is an expert in your field, they will want to build a relationship based on trust with you. An expert banker will show an interest in getting to know you personally so that they can trust you as a business partner.
When it comes down to making a final decision on which bank or even which banker to work with, an open dialogue between you and your banker will result in a more customized plan, ultimately helping your business reach its financial goals more quickly and efficiently.
Anna Colton is the small business banker national sales executive at Bank of America, building and leading a sales team of more than 1,000 small business bankers.
