From the last post, I told you about some the debt service coverage ratio. If you haven’t read that yet, here’s the link.

Now I want to let you in a little secret.
You see, a couple of weeks ago, an associate of mine approached me about a problem they had with a bank.
This is the second time they’re borrowing money, but this time the loan that they’re getting is bigger in amount. Their first loan was a small business loan which was less than 5 million. Now they need more than that. And they needed it fast.
They approached the bank where they got the first loan, and they thought that it will be processed as fast as the first one.

“Why are banks so slow?!”

After a few weeks of no feedback, they missed the opportunity and lost millions in sales.
They heard of me from a common friend and started complaining about this.
You see there are a couple of reasons why banks can be REALLY slow in processing loans. This is especially true with big banks, but can also happen to smaller banks as well.
It’s all about TIME
It all boils down to TIME. Specifically, the time the account officer can spend on your account.
Imagine how many applications your account officer can be handling. With a lot on his plate, he has to make quick decisions on where to dedicate his energy. He has a quota that needs to be filled, too.
With all of those happening, his incentive is to prioritize the simplest and most complete applications.
So if your application is filled with incomplete documents, and your proposal too hard to understand, expect a long wait.

How to make the process faster

For this business, I help them get the loan faster by doing three things:

1. Fixed the Proposal

I made sure it was as simple to understand as possible. Since I knew the information that was important to the bank, I highlighted the information in the write-up. This made it easier For the officer to read it and understand it. It also served as a template for his own credit proposal, again saving some time.

2. Reviewed the Consistency of the Documents

Each element of the proposal, including the supporting documents, should be consistent. I reviewed their documents and directed the responsible teams to make the changes necessary to make that happen.
An example of some simple things that a proposal may be inconsistent with is the reported sales versus the bank statements presented. The borrower’s staff sometimes attach the bank statement used by the purchasing team (and thus representing costs) instead of the account where collections are deposited.
If banks notice that, that could cause another delay in the process.

3. Constant Followup

Because we made life as easy as possible to the account officer, all that was left was to check on the progress of the application.
It helped that we developed relationships with multiple funders. We were able to identify the right bank. Still, we had to monitor what was happening and address any problem quickly.
In the end, they got what they needed. The loan was on time, and they managed to get the contracts they wanted.

Conclusion

Banks processing can be tedious. Though, if you know what you are doing, are diligent and really try to push things forward, the process will be faster.