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Yearning for the Good Old Days When Knowing Your Banker Meant Something

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By : Carolyn Capalbo    99 or more times read
Remember back in 'the day' when a nice guy with a successful business was able to talk to his friendly banker and easily secure a loan to improve their company: well... sadly it is a new day.

Federal banking guidelines are making it tougher to get a business loan, especially from smaller banks. Business owners in search of loans or increased lines of credit are running into difficulty as lending guidelines become stricter. The main issue centers on collateral. Traditionally loans are granted based on the borrower's collateral (typically commercial real estate) and with decreasing property values there is less leverage for the borrower, and reduced security for the lender.

Smaller lending institutions do not have the capital to cover their loan loss revenue and therefore have less money available for lending. Even as the economy shows some improvement, the banks are not able to bolster it by granting new loans due to the restrictions placed upon them. Take for example the case of a Florida business owner who, with a net worth of $2 million and a solid borrowing history, was told by a bank executive that "they would be eager to extend his line of credit to help expand his business", but denied the request stating "Our hands are tied because the government says you have to follow these guidelines". With 41 bank closures so far this year--mostly due to soured loans--it is no wonder these institutions are under close scrutiny.

This scenario makes for tricky times as businesses hoping to pull out of the recession by expanding operations are being met with resistance by lenders. The rationale of the 'rule makers' is that the tighter rules will help avoid the previous problems associated with lenders being too eager to lend to those who may not have been able to handle the debt load. It just seems unfair that qualified borrowers are being denied the opportunity to further succeed.

The end result of this is the hindered attempts of businesses that have weathered the economic storm and were hoping to come out ahead of the competition by improving or expanding their operations.

Unfortunately, having a successful business, a good credit rating, and a solid relationship with your banker is no longer enough to secure a loan for improvements or growth. Heavier regulating may be the answer for avoiding a continued debt crisis; however, when it is holding up the growth of legitimate credit seekers, it may not be the solution.
Top REALTOR , Carolyn Capalbo, specializes in Northern Virginia real estate, and is a Certified Distressed Property Expert. You can search for homes in Prince William County and surrounding areas, by visiting her site at

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