The Larger The Bank The More Likely To Decline Your Business Loan

It is important to know about the loan approval process before submitting your business.A business owner needs to be informed so that you can know how to apply and be approved for your loan. A business owner also needs to know what types of loans to apply for and what it takes to get the funding they need.


If you are getting ready to look for financing to get your small business started, or need to get some extra cash to improve an existing business, the first step is to consider what type of lending institution you should be approaching. Large banks seem like a great idea from an initial prospective. They have a lot of resources and it would seem like they would be the most willing to work with a wide variety of different types of businesses.

That first impression is quickly dismissed when business owners look a little closer at the options available to them. The first drawback to a large lender is the fact that they are completely impersonal. They not only do not know each applicant and what the specifics of their businesses are, they simply do not want to know. A large bank is much less likely to take the time to consider anything outside of the basic parameters of the loan application when making a decision. That’s fine if everything in your loan application is spot on.

The reality of it is, most small businesses have a hard time meeting the criteria for a perfect loan application. This is especially true for new entrepreneurs who are just starting their first venture. Small business owners, even those with a lot of experience, do best when they have a bank loan officer who has the time to sit down with them and go over all of the options for different types of loans with them. A personal loan officer at a small bank will more likely have the desire to see a loan goes through.

Even a small bank must make sure that the loan application makes sense, and meets standard criteria, but the fact that smaller institutions are less likely to have many applications a month, much less per day, makes them more willing to help the business owner develop their application and show the applicants how to get the requirements met properly.

Loan Offer Vs Computer

While most banks use computers to help determine if an application meets the requirements of the bank for a loan, a small bank will usually have a loan offer to help the business owner when filling out the application. That assistance can mean the difference between acceptance and rejection for something small and insignificant that just happened to be left out or misinterpreted by the business owner.

Large banks simply do not have the time, or the need to help the business owners create the best application for a business loan. When approaching a large, national lending institution, the business owner is left to their own abilities when completing the application, and it is rarely even seen by a loan officer before the computer gets all of the data to make the decision.

It’s Who You Know

The old saying “It’s not what you know, it’s who you know,” has an air of truth to it when it comes to business lending. That big corporate bank loan officer won’t know anything about you, but your local bank loan officer probably has met you personally many times in the community. Maybe your children go to the same school, you attended school together in the past or you live down the street from them. Those personal relations probably shouldn’t have any place in deciding whether you actually get a business loan, or not, but they do in many instances.

Even if the local bank’s loan officer can’t say “yes,” or “no” to your application based on your association with them, they are more vested in helping you through the process to get the loan application right. Another benefit to a personal connection with a loan officer is if an application is rejected, you know someone who will more likely push for a generous review of the situation that could end up overturning the rejection.

Who is in the Office Today?

With a large lender, the person you talked to about applying for the loan may not even be there when you actually hand in the paperwork. The new person will probably have no idea of the terms or requirements you discussed with the previous employee. The second person, in turn, may not be around at the time of the loan decision to help you find out what went wrong if it was rejected. If the person you dealt with when filling out the application, submitting the application isn’t the one there when you need help with a rejection appealed they won’t have any idea what went on before with other people you have spoken with.

While the current economy will have some influence over job security, in general small banks have a lower turnover rate. The personnel at small banks are more likely to have been at the same job for many years, whereas bigger banks have much greater degree of turnover regardless of the economic atmosphere.

The Advantages of Bigger Bank Business Loans

There are many advantages small banks offer, but speed is not one of them. Smaller banks are at a disadvantage when it comes to making fast decisions, and business owners who need cash fast to make payroll, buy equipment or get the space they need to start up may lose out on a long application process. As impersonal as they are, the rigid requirements and impersonal banking methods lend themselves toward speed. Small business loan applications can often be determined within weeks and in some cases even in less than 24 hours.

How to Decide on a Lender

When it is time to apply for a small business loan, decide if you have the time to go over every aspect of your business and make sure it meets the requirements of a big bank loan application. Spending the time to understand what is needed, and getting all of the information needed will help speed along an acceptance.

Big banks may have better lending rates than smaller banks, because they can afford a little more risk than the local bank. If your business has perfect credit, or you are willing to put up your own good credit as a security for the loan, a big bank may be the best option. Small business owners who are unsure of the process, or need a little help overcoming difficult loan requirements, are more likely to have a better advantage with a small lender.

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