Ask the right questions before applying for a loan

12/23/2011

When starting the process of getting a small business loan, how can a company determine which financial institution is most likely to lend to them?

Rhoit Arora, CEO of Biz2Credit, explains to Small Business Trends that there are some specific signs to look for when and questions to ask when considering where to find a loan.

For example, be sure to research a bank's underwriting criteria - such as its credit scores, the number of years it's been in business, etc. Other questions worth asking include what industries it typically funds, what age of business is it looking for, if it makes SBA loans and if it will fund startup loans.

A grading tool released by small business advisor MultiFunding is designed as an alternative to assist companies in the process of getting a small business loan. It rates nearly 7,000 U.S. banks on a scale of A to F, calculating its ratings based on quarterly Federal Deposit Insurance Corporation call reports.

Some big banks may receive less than satisfactory grades, as The New York Times recently reported the 25 American banks with the most deposits in 2010 underwrote $3.6 billion in SBA 7(a) loans - down nearly one-third from 2006 figures.