Getting The Most Out Of Your Banker In A Tight Credit Market

Last week, we talked about the need to meet with your banker prior to your annual loans coming due. This week, we’ll talk about what you need to do before you have that meeting.

My resource for this article was a senior lending officer (I’ll call her Jane) with Suntrust Bank who oversees credit for high earning doctors and lawyers in Florida.

Here is what Jane likes to see when her clients come in to apply for a loan:

Be prepared. It helps your case greatly if you appear to be organized and have a good grasp of your own finances. Bring all your pertinent financial information:

• Personal balance sheet showing what you own and what you owe
• Profit & Loss statement for your practice
• Last three years of tax returns.

If you don’t have all this information, you should have an organizational meeting with your accountant before visiting your banker.

Be honest. Bankers are pros at checking credit and analyzing financial statements, so you shouldn’t try to hide anything.

Know your credit score. This is more important than ever in a tight credit environment. Financial institutions use three main services to provide credit scores: TransUnion, Equifax and Experian. You can access all three from a variety of sources on the web.

While the criteria will vary slightly from bank to bank, a score of 800 is perfect and 750 is very good.

Jane said her bank makes few loans to customers below 700. Another banker told me he is OK with 675. Scores of 650 or less will require some explaining.

Be proactive. Let your banker know right up front if you are having trouble paying down a loan or if 2008 looks to be a down year. Explain why you are in this situation and have a plan, such as cutting personal or practice expenses, for correcting the problem.

Be conservative. Understand that bankers are in a very cautious mode right now. You are going to scare them if you go in with aggressive plans to expand your business in 2009… unless of course, you can self-finance.

Don’t expect 100% financing. Jane said doctors should be prepared to personally guarantee equipment loans and expect to make a 10 to 20% down payment. The bank will help you buy something, but they won’t buy it for you.

Know what kind of terms you want. Lending requires give and take. Jane likes for her clients to label each component of the loan as negotiable versus non-negotiable in advance.

For example, the components of a $100,000 equipment loan would include the amount of your down payment, the interest rate, term of the loan, payment schedule and the collateral.

Be insured. Banks want to know that the physical assets of the practice are insured as well as the individual. Many banks consider disability to be very important.

Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2008 Jerry Hayes, OD. Not to be reproduced without written permission of the author.