Large Commercial Banks

April 13, 2006

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For startup businesses, large commercial banks historically have not been an attractive source of financing. However, a large bank can be a good source for a loan if your business has been operating successfully for a couple of years.

Today, many of the larger banks claim to target small businesses because that segment of the financial market is increasing and lenders are becoming more competitive for every business dollar. More regional and national banks have increased their community profiles by creating small business departments that actively solicit local business, participate in small business seminars, and sponsor local business events.

In addition, these larger banks are at the forefront of developing technology that will allow them to reduce the time and cost of their loan application processing.

While a large bank's "software review" of your loan application may lack the personal involvement you consider essential for your business needs, the availability of this option at least broadens the supply of money and may make all lenders more competitive in their loan rates and terms.

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Although many large banks are making efforts to compete for small business borrowers, the target customer for these banks is still more likely to be a "big" small business, with a proven track record and significant available collateral. These institutions remain very conservative lenders that will require significant documentation and often more than 100 percent collateral to support a loan. Moreover, automated "cookbook" recipes for reviewing business loan applications will not favor those small business with unique profiles or with perceived deficiencies in loan application criteria. In short, aside from secured loans and mortgage financing, larger banks are still not a major participant in small business finance. You may want to give a big bank a try, but your best bet may remain the local, community lender.