Picking The Right Commercial Bank & Getting a Line of Credit

Earlier this year at TrainSignal, we decided to increase our line of credit and so we started shopping around banks to see which bank would offer the best terms. We had been in business for over ten years (100% bootstrapped) and we’d grown from a one-man company to over 50 employees when we were acquired in August. We had been with our bank for years now and it was a “local/village” type bank that is owned by a holding company that in turn owns about 15 community bank subsidiaries. We’d never had any complaints working with them, but we had always been a “low touch” customer of theirs so we really never saw any perks or benefits working with them either, nor did we know what to expect from a bank.

Here’s how we searched for a new bank with an increased line of credit:

1)     We put together a pitch deck, that included:

  1. Our story, who we are, what we do, etc.
  2. A lot of historical financials dating back a couple years
  3. Our financial projections for the next two years

2)    We compiled a list of banks to meet with

  1. Who we have connections with already
  2. Who our network have connections with

3)    We reached out to our networks and got recommendations/introductions to an additional eight banks

4)    We then met with eight different banks separately at our offices, where we presented our pitch deck

  1. One of the banks wasn’t going to be the right fit based on our line of credit needs and bowed out after the first meeting
  2. All other banks followed up with questions, requests for extra documents (financial statements, banking records and/or tax records)

5)    We started having second round meetings about two weeks after our initial bank meetings

  1. During these second round meetings, each bank presented their line of credit terms and what they could bring to the table (banking technology, their people and their expertise, etc).
  2. We collected all the info and compiled it in a document to easily compare banks and their offers and services

6)    After getting terms that we found favorable from one bank, we then went back to the other banks and explained the terms they would have to beat, giving them a chance to beat them

7)    We had a lot of phone calls with banks back and forth until we ultimately reached our final decision

8)    We made our decision final with our new bank

Our process wasn’t perfect, but we learned A LOT. We learned a lot about what banks offer, and we learned a lot about ourselves, ultimately educating ourselves for future banking needs.

Here’s what we took into consideration when choosing a bank:

1)     Financial strength

With so many banks failing these last few years, we felt it was important to work with a bank that is financially sound. With a little research online, it’s pretty easy to get a good idea of how asset rich a bank is and how stretched they are. Some key performance indicators to look at include: loan/deposit ratio, capital ratio and overall credit quality.

2)    Technology

Some banks have online banking services that look like they’ve been built in 2002 and haven’t been updated since, while other banks are investing heavily into their online services to make sure they’re on top of the game.

3)    The people & communication

Were they treating us like we’re their most important potential client, or were we just another corporate account for them? How difficult was it to reach them? Did they get back to us on questions in a timely manner? At the end of the day, it’s still a relationship that’s being formed and you need to be partners with the bank. They need to be someone you actually enjoy working with, instead of dread. We put a lot of stock into finding the right people, not just the right bank. It’s the people at the bank who make the real difference.

4)    Industry experience

Did we have to explain our business to them or did they understand our business? Believe it or not, it was a major factor in choosing the right bank. Some banks were better suited for your old school manufacturing and service related industries, which we knew wouldn’t be the right fit. The banks we sought out were well versed in online businesses and understood the way we operate and what we need out of a bank.

5)    Speed & efficiency

As mentioned before in communication, the speed of getting answers and paperwork going back and forth became a very important factor in our decision. Turnaround on questions, paperwork, etc. was extremely varied between banks and it ruled out a few banks solely on that fact alone.

6)    Decision makers

The really interesting thing between banks was who could make decisions and who couldn’t. Some of the commercial bankers who met with us needed to go through an extensive process to get a line of credit in place, including the banker presenting to a board, while some bankers were able to make the decisions themselves. In one example, we’d present to a bank on a Tuesday, they would then present to their board the following Tuesday and then we wouldn’t hear back on a decision till Friday. Another banker we met with, from a large national bank, was actually able to make the decision himself and had our line approved within two days.

Ultimately when we picked which bank to switch to, one of the most important factors for us was the decision making power. If we ever needed the line of credit increased or any other serious matter we didn’t want to have to deal with spending weeks on the hook. We also didn’t want to have the decision made by people we were never able to meet with or present our business to.  As a bootstrapped business we were able to secure millions in available funding to help grow our business without giving away any equity.

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