From time to time, I’m asked to assist a company in obtaining financing for business purposes. Part of the key in finding clients the cash they need is finding a bank who is willing to lend. And in today’s economic environment the health of banks range from managing day-to-day to avoid an FDIC takeover, to banks who are aggressively pursuing new lending relationships.
So how do you determine which banks to approach? There are several tools I’ve recently come across that can help. Bankrate.com has a “bankrating” tool that rates banks across the country as to their financial stability. You probably don’t want to chase banks for money rated 1 or 2, which are the lowest ratings they give. First of all they may not be interested in lending money since a bank with this rating is more interested in adding capital, such as bank deposits. If they do lend, their lending criteria could be too strict for your situation. Second, a bank who is in trouble now could end up not renewing a line of credit, or renewing a line of credit with less favorable terms leaving you scrambling to find a new bank when you can least afford it.
The site also provides quite a bit of detailed analysis as to why they were given a certain rating.
Another nice site is from Investigative Reporting Workshop. This site keeps tabs on many banks by calculating a “troubled asset ratio” which they use as an indicator of bank failure. A rating of over 100 indicates trouble.
Crain’s Chicago Business also just came out with a list of Chicago’s Largest SBA Lenders. It’s a list of 25 area banks who are currently active in the SBA lending arena.
These can be useful tools to use in evaluating your current bank, especially if you have extremely large deposits or an existing line of credit that renews annually, or in finding a new banking relationship if you are searching for a new one.
Steve Trojan, CPA is owner of SMT & Associates, Inc, a Crystal Lake IL based tax and accounting firm, and Complete Payroll Inc, (www.completepayrollinc.com) a payroll processing firm.