Know which bank your business needs to work with

As I was preparing for the panel at the CREC Oklahoma Forecast event in OKC a few weeks ago, I made some calls to check on anecdotal data we had from bank lending in late 2009. As it turns out, we got very different answers from different lenders we spoke to.

In a normal market (pre-2009), each bank has different motivation, lending practices and requirements. But in the current business lending environment, those differences become more pronounced. And they also have a material impact on businesses in Oklahoma looking to access capital in 2010.

The decision-makers at each bank have to consider who to lend money. Are they looking to increase or decrease retail or real-estate exposure? Are they interested in lending to new customers or ensuring they keep their existing loans? What is their tolerance for riskier loans? The more you call around different banks, the more it becomes apparent that they have very different objectives.

For example, of three lenders we spoke to, Lender A was aggressive on loan cost to win new business, Lender B was aggressive on loan structure (guarantees, covenants, advance rates and reporting requirements) to win new business and Lender C was aggressive on structure to retain existing customers.

If you are a business looking for capital in 2010, don’t be surprised if a bank has changed its lending practices since the last time you spoke to them and don’t be surprised if it takes a few phone calls and meetings to find the right bank that can match your needs with their objectives.

At the recent forecast event, the theme was the “new normal”. This new normal is going to be a reality for many businesses for at least the next couple of years. We are going to have to not only work harder and smarter for every success, but also make extra preparations and more effort to find the best capital structure and right lender to work with.