February 29, 2008, Newsletter Issue #176: Why Do Banks Accept Loan Requests?
Tip of the Week
As a customer, the loan decisions made by your bank may seem a bit mysterious. A bank officer takes your request. A committee considers the request and a decision is handed down. Frequently the reasons for the decision aren´t clear.
It may help to understand the factors the bank considers when making a loan. Here is a partial list:
1. Your financial performance
2. Your behavior in regard to previous loan requirements.
3. The confidence the bank has in you
4. The profitability of the loan
5. Bank policy regarding loan mix
6. The industry you´re in
7. Prior bank history with companies in your industry
Some of these factors are within your ability to control and some are not. Always ask your banker to explain the loan decisions make with regard to your company.
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