Bank Financing: Almost Impossible When You Need It
Do the banks care about your small business?
Everybody says it.
Most people believe it.
The banks don’t care.
When you need money they won’t lend it to you.
When you don’t need money they will lend it to you.
Two stories from clients in the past month:
One is growing steadily and will soon hit a $7 million revenue target. He has a pipe-line full to the brim with, I’m not kidding, $15 million to $20 million in deals that can be executed in the next 12 months. Will the bank help him to provide materials purchase financing? NO.
Now, there are some details like that fact that his line of credit is maxed out already and that for years he has been plowing earnings back into the business to grow. But, even if you saw the entire financial picture like the bank would, it does not change the fact that he has actually almost $20 million in real contracts – and they won’t advance him a penny.
The other company is pre-revenue. They have a new building material that is specified in all the building codes. It is so green that an emerald looks pale next to it. And they actually have builders ready to do a paid test leading to multi-year contracts.
But the bridge financing request they made for a really small amount was denied – partly because of credit report troubles from past struggles to develop the product in the first place, using their entrepreneurial spirit and literally risking it all. They fought the good fight and are now at first down on the one-yard line in a tie game. But they will not advance him a penny.
You might accuse me of bias in favor of my clients. You might accuse me of leaving out some vital fact. You might accuse me of glossing over the details.
I am being 100% objective. These two businesses have actual customers wanting to buy their products.
But the message in each case is – no thanks. We want you to be “in-revenue” before we finance you. Well, how do I get into revenue if I’ve used all my resources to get to this point and you won’t help me move it across the line?
My question: How did we get into this situation?
Two things happened:
- The human element has disappeared. There is no person assigned to the file with the authority to listen to the client, actually talk to the customers, see and understand the deal.
- The system relies on algorithms that feed a result to the monitoring team who don’t question it. There literally is no interest in taking a tiny risk.
It’s true. If you need money you can’t get it. If you don’t need it they will keep forcing it on you.
This is a far cry from how my grandfather was treated. A new Polish immigrant working in his fifth year in a hotel service industry job in a high-class railway hotel of that era, he scored a loan from a banker who saw his diligence, realized the depth of his character, saw that he was focused on raising his family in his new country.
The banker took character into account and gave him a loan. That act launched a multi- generation business that provided financially for many decades.
My grandfather trusted his banker who in turn trusted him.
How is it that we have lost that?
Can a “Catholic Economy” change this? Absolutely. Ask yourself: Why can’t we finance an early stage business or start-up in our parish using creative models like a “parish credit union”? Why not indeed?
God bless you, your family, and your works. You can be Catholic and successful in business. Believe it.