During the worst months of the recession, community and regional banks were the only means of credit for many small businesses. But many of these institutions are tightening up their lending practices.
Why? Regulatory agencies such as the Federal Deposit Insurance Corp. and the Federal Reserve have ramped up their analysis of small lenders in attempt to uncover trouble assets and keep the local banks in good financial health.
Agencies are asking lenders to increase capital and loan-reserves. This in turn means that they must be more discerning when it comes to doling out loans.
However, community banks are still lending to small businesses. Lenders just expect more info — on a more frequent basis.
So, if you’re looking for a loan, be prepared to provide more than routine financial info (sales figures, etc.), as well as info about your customers’ financial health.
Best best: Forge a partnership with your lender and check-in often — even when things are going smoothly and there’s no problems to report. Providing additional info may be time consuming — but it may help the lender defend your credit line should a regulatory agency question it.