For many established entrepreneurs, the local commercial bank or community bank may still be the best place in town to get a small business loan.  But too many small businesses try three or four banks and then stop looking. Ideally you should be eying several bankers. Find out which financial institutions in your market make loans to firms like yours. Not all banks specialize in business loans. Some specialize in lending only to firms in certain industries. Others lend only to those in certain stages of the business life cycle (usually, not startups).
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Once to find the right bank, the goal is to build a rapport with a banker long before asking for a small business loan. This person isn’t the local teller who knows your name when you make deposits. This is a banker who understands your industry. W You want to be able to sit down with that banker on a regular basis to share information about how you are growing your business.
BlackEnterprise.com wanted to find out what is the best way to build a banking relationship and reached out to the Young Entrepreneur Council (YEC), an invite only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective , a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. Here are their responses:
1. Start Early
Start building a relationship well before you look for financing. Get recommendations and meet different bankers before opening an account. Find one experienced in working with startups, with products and services that can fit whatever stage of growth you’re in. To get bank funding, you’ll need a business plan, financial statements, assets to use as collateral, and a source of funds for repayment.
— David Ehrenberg, Early Growth Financial Services
2. Give It Time
When I first went to my bank for a line of credit, I was surprised to find out that I only qualified for a small amount about a third of what I had in the bank at the time. As I found out later, the problem was that nobody knew me. Since then I come in regularly, chat briefly with my banker, share my wins and ask for an increase every 9 and 1/2 months.
— Vladimir Gendelman , Company Folders, Inc
3. Look at Your Revenue
Revenue trumps everything. Every good lender will want to see a lot of revenue and history of revenue in the company. It will eventually come down to your revenues and relationship with the lender over time. Even your personal banker has a boss, and his boss’s boss will be making the decision. He’ll look at the bottom line.
— John Rampton , Due
4. Change Your Approach
I see many entrepreneurs going to bankers hat in hand. This is the worst type of attitude to adopt and will result in lost opportunity. Banks must lend money to stay afloat. They need you to keep their business going. Realize that paradigm and it will change how you interact. Try, “We have a growing business and are evaluating banks to see who will be the best partner for us.” Game changer.
— Jeremy Brandt, WeBuyHouses.com
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5. Show a Record of Cash Flow
Banks love cash flow, and they’ll ensure they’ll get paid back first. They want to take the least amount of risk possible when lending you money. If you can demonstrate the ability to generate monthly cash flow, then you’ll have a chance of getting a loan from a traditional bank.
— Faraz Khan , Go Direct Lead Generation
6. Foster Relationships
I get to casually meet presidents and VPs of banks that socialize at my business club. It’s through meeting in this environment (followed up with lunch) that has allowed me to foster a trusted personal relationship and gain additional insight into what each bank specifically looks for. This time provides me the opportunity to ask all the questions I need to best position my company for investment.
— Souny West , CHiC Capital
7. Share a Good Story
We are going through this now ($3 million loan, buildout/equipment) and each bank wants to hear a good story. Some want aggressive growth plans, others want more moderate, reliable plans. Our experience is the same narrative will resonate differently with each bank, so it’s important to understand what their risk tolerance is and where you fit into their portfolio so you can tailor the story accordingly.
— Tommy Golczynski , Assured Flow Solutions, LLC
8. Give Important Information
I’m not speaking as a banker, but as a venture investor who lends to young companies. We look for teams that
are into partnerships. We want to help our portfolio companies succeed. Money’s just a part of what we provide. Further, we want information. Don’t try to hold it back; it will bite you later.— Alec Bowers , Abraxas Biosystems
9. Show Growth and Honesty
We’re a lender. When we evaluate loans requests, we take a holistic look at your business and want to see growth, but we also highly value honesty don’t shy away from the tough subjects. If you’re growing, you’ve likely had issues with revenue or bankruptcy. We aren’t going to judge you. We want to be a trusted partner who helps you grow and solves your capital problem.
— G. Krista Morgan , P2Binvestor
10. Be Reliable
Bankers need you to be as predictable as possible. If you’re paying dues on time, publishing accounts as per standards and generally going by the book, you would continue to develop a relationship. To go further, anticipate their needs and give them what they want ahead of time. Bankers are busy people and if you make their life easy, they will be forever thankful.
— Pratham Mittal , VenturePact