Warehouse owner meeting with banker
Warehouse owner meeting with banker

Five common commercial lending questions

You’re considering a commercial loan but are a little unclear about all that goes into the process. That’s not uncommon. The commercial lending process can seem daunting, but with some basic insights — and a good working relationship with your lender — it might not be as worrisome as imagined.

When you are looking for a lender there’s a few key things to look for. One of the first things you should prioritize is that the lender is as transparent as possible throughout the lending process. They should be easy to communicate with and responsive to your needs and questions.

Even if your questions are very specific, and geared to your company or field of business, our lending experts have probably heard something similar. If your question is more general in nature, take a look at these five common questions we hear.

1. What determines the size of the loan? Several variables go into this, including what the loan will be used for, your business’s cash flow, existing loans you already have on the books, and available collateral. A knowledgeable lending expert can help you work through these and other variables specific to your situation.

2. How can I get the best rate and terms? By working with a loan professional, you can make sure your loan request is as strong as it can be, so you get the best rate and terms available. They’ll ask the important questions and make sure you have the right information included.

3. Are commercial loans personally guaranteed? The answer is maybe. Commercial loans are reviewed on a case-by-case basis, and, in some instances, a personal guarantee may be required. That’s why it’s best to coordinate with a lending professional, ideally a local decision-maker who understands your business environment, and can be creative, consistent, flexible, and responsive to help you structure a loan to suit your business’s needs.

4. How is the loan structured? Typically, a commercial loan is a lump sum that you repay with interest over a set period of time. It can also be set up as a line of credit that you draw down as needed. The repayment terms, interest rates and qualifications can vary widely depending on the loan.1

5. How long does it take to get approved? That can depend on the bank. Sometimes, especially with national banks, the process can seem to take forever. And if you’re turned down, there may be no explanation why. Local banks are often more responsive. For instance, First Financial Bank typically turns around a decision on a request in two weeks or less, so you can seize opportunities faster.

There are a few questions we don’t always hear but you should ask. If you’re an entrepreneur, ask the bank how it handles a downturn or unexpected challenge in your business, negative business trends, or a default on the terms of the loan. It’s better to get answers to these difficult questions before you request a loan. First Financial Bank understands how companies grow and that there are ups and downs. We work with clients in creative ways to structure a loan to suit their needs and the bank’s requirements. And if difficulties arise, we’re transparent about the issues and give straight answers so you can make the best decision.

If you decide to apply for a commercial loan, be ready with answers to important questions. For instance, how is your company’s right to win, cash flow and its financial reporting? If you’ve faced difficulties, be upfront and clear about them. The lender will also want to know what collateral is available. Be prepared to provide a detailed explanation. And finally, the bank will want to know about the character of the business. Be ready to give the background story on your company, how it started, what the mission is and where you see it going.

At First Financial Bank, we strive to make the lending process as transparent as possible and provide clear communication at every step. Add to that the personal service that comes from being a local banking partner and you can look forward to a smooth lending process, one that includes local decision-makers who will provide answers to your questions in plain language.

Your business has needs and you deserve a lender that gives you the ability to obtain the working capital to accomplish your key business goals. Knowing the right questions to ask is the first step to securing continued success this year and years to come.