Financing: It's Not All About Interest Rates - There Are Many Factors that Determine if a Loan Package Works for You

October 5, 2005

Obtaining a commercial loan from a financial institution can be complicated, and it requires substantial consideration.

A bank traditionally proposes terms that are necessarily protective of its own best interests, so the borrower must be very careful to do the same. Unfortunately, many borrowers make their decision to sign on the dotted line by a sole factor, the interest rate.

Basing one’s decision on this sole criterion can be a dangerous mistake. Many other factors should be carefully considered before a commitment letter is signed, sealed and delivered, as many of the terms may be negotiable.

First and foremost should be a careful evaluation of the loan officer, who should be someone with whom you are comfortable and share an open and honest mutual respect. He or she must have the ability to understand and the desire to care about your business. The lines of communication must be strong between the two of you, and if you find that you are not comfortable with him or her during the loan application process, you may want to consider asking for another representative or, if necessary, consider another financial institution.

Collateral is also an important consideration when evaluating loan terms. Whenever possible, it is recommended that business assets be utilized before personal ones. In the event that business assets cannot substantiate the loan amount requested ...

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by: Gary L. Fialky, Esquire

September 6, 2005

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