Salvaging Millions
One size does not fit all, pt 2
This is the ninth in a continuing series, co-authored by Ron Sturgeon and Greg Morse, founder and president of Worthington National Bank

Ron: Ideally, you’ll find a loan officer who can work with you. But it’s not the amount of the loan that’s important; it’s the size of the debt. Say you work with an officer and his authority is $100,000, and you borrow that amount. Then the next day you need to borrow $5,000. Well, now you’re in big trouble because you have to go to the next concurrence officer or go through the next level of approval. So you have to know going into it how much authority the banker you are dealing with has. I can recall an instance where I owed $992,000, and wanted to finance a forklift costing $25,000. Because I passed the threshold of $1,000,000, a whole new underwriting process kicked in for all my credit, not just the forklift loan.

Greg: And those numbers have changed drastically. At one point, I had a $2 million loan limit. But those were different times. What I would recommend is that they have a loan officer with at least a $100,000 loan limit.

Ron: This is one of those cases, I guess, where you don’t necessarily know what the right number is, but you definitely know when it’s a wrong number. And $25,000 would be the wrong number. Because that indicates, right off the bat, that the loan officer is possibly brand new and doesn’t know the ropes, and that the bank doesn’t have a lot of confidence in his or her ability yet.

Cheating on your banker

Ron: Having a good bank that you can rely on is important for every business and businessperson. But even though it’s important to create an ongoing, solid relationship with that lender, it’s also important to have a second bank that you can turn to.

A second bank gives customers the option of accessing money that the first bank might not be willing to loan. In today’s banking climate, with all banks being more hesitant to make loans, it’s more important than ever to create relationships with more than one bank. From the bank’s standpoint, your primary bank is the one that has your primary checking account; you’ll want to use the same diligence in selecting a secondary bank as you followed to find your primary bank.

It’s important to note that having a second bank isn’t about being able to shave another quarter of a percentage point off a loan rate; it’s about being able to get what’s best for you and your business. And at the same time, you’ll find that when banks are competing for your business, you’re more likely to get the best rates. But you don’t have to promote the competition; they KNOW the other bank is out there. If you have credibility, both banks will generally price you without your having to ask for a deal.

Next time, we will discuss ways to get what you want from your bank.

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Ron Sturgeon is past owner of AAA Small Car World. In 1999, he sold his six Texas locations, with 140 employees, to Greenleaf. In 2001, he founded North Texas Insurance Auction, which he sold to Copart in 2002. In 2002, his book “Salvaging Millions” was published to help small business owners achieve significant success, and was recently reprinted. In June 2003, he joined the new ownership and management team of GreenLeaf. He also manages his real estate holdings and investments. You can learn more about him at WWW.autosalvageconsultant.com He can be reached at 5940 Eden, Haltom City, TX 76117, rons@rdsinvestments.com or 817-834-3625 ext 6#.