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For many of us in the commercial lending industry, there was no year quite like 2020. In the past, banks and credit unions have relied heavily on trend analysis. We keep our finger on the pulse of the business community by analyzing local and national economic trends.
When considering small businesses for commercial loans, we analyze the numbers to paint a picture of their potential for success and the challenges they might face.
In 2020, the dependence on trend analysis shifted dramatically. The pandemic threw a wrinkle in the landscape of how we analyze businesses.
No longer can lenders rely solely on economic trends and data to determine eligibility for a commercial loan. The pandemic was a stark reminder to take a step back and look at the whole picture.
Though a lot has changed because of the pandemic, there are a few key components of the commercial lending process that remain important.
If you are a current or potential small business owner looking to apply for a commercial loan, here are some expert tips that you should keep in mind throughout the process:
1. Establish a relationship with your lender
If it’s your first time getting a loan, make sure to prioritize establishing a relationship with your lender. Think of your lender like a doctor or dentist. They may not be improving your gum health, but it’s important that they’re a good fit for your needs. To foster a trusting relationship between with lender, prioritize building a relationship of mutual respect early in the process.
2. Tell your small business story
In the aftermath of the pandemic, your small business story is more important than ever. When numbers fall short of providing adequate context, especially during difficult years like 2020, your lived experience paints a better picture of what your business is truly capable of. To process a loan request, lenders are typically reviewing documents, spreadsheets and numbers. Your small business story brings these elements to life in a way that is more than just the numbers.
3. Be proactive
Once you establish a relationship with your lender, keep them updated on your business – the good, the bad and the ugly. Establishing a quarterly check-in with your lender can be especially helpful to keep them in the know. When you strengthen the line of communication with your financial partner, they’ll be better equipped to help you when any challenges arise.
4. Establish your credit early
Even if your business is just getting off the ground, be proactive about establishing credit with your financial institution. Like individual credit, the more history you have, the better. Oftentimes small businesses establish credit too late because they don’t need a loan. This delay sets businesses back. Establishing a credit history in your business’ name, not your personal name – no matter how small – will allow you to accumulate credit and position you for the future.
A lot has changed in the financial industry in the past two years, but remembering these key tips is half the battle in securing a loan.
If you are a small business owner and want to chat with a commercial lender at Elevations, visit elevationscu.com/loans.
Todd Peyok is the Vice President of Commercial Lending at Elevations Credit Union.