Getting Through the Bank’s Door
THE FIRST LESSON a prospective borrower must learn is that there is nothing magical or mysterious about banks or bankers. Banks are businesses, just like General Electric, Ford, IBM, and Wal-Mart. Banks are in business to make a profit, just like any company in a market economy. They have shareholders who must be satisfied with their investments. They have boards of directors who set bank policy. They have strategic growth objectives, just like other companies. And the officers and employees of banks make good and bad business decisions, just like anyone else in the business community. There is nothing unique about the banking industry, except that it must operate in a regulated environment under rules laid down and monitored by federal agencies.
Because this is a regulated industry, bankers are not free to make business decisions based on judgment and experience as officers in other industries do. In fact, bankers have unique ways of judging the viability of a business transaction that differ markedly from those used in other industries.
It seems ironic that we spend days, maybe weeks, researching the best deal when buying a car and then fall apart when it comes to negotiating a bank loan. The self-professed mystique created by bankers tends to throw us for a loop, and we end up taking any loan amount and term offered. Yes, bankers do use a different set of criteria for making a business decision from those used by other business managers, but if we understand where bankers are coming from and the criteria they apply, we should be as tough when negotiating a loan as we are when negotiating for the purchase of a car.