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Securing a Commercial Loan: What You Need and Need to Know

Business leaders regularly rely upon commercial loans as a resource for advancing the growth and operations of their organizations. So when might a commercial loan be right for your business and what else is there to consider? Read on for some perspectives.

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Getting a Commercial Loan: Find the Right Solution for Your Needs

Commercial loans are available to help businesses grow and operate efficiently across a range of strategies and situations. These include:

  • Working lines of capital, to support a company’s accounts receivable and inventory as it grows
  • Equipment loans, to purchase equipment and improve efficiencies of operation
  • Owner-occupied real estate loans, to enable businesses interested in owning their real estate and buildings
  • Acquisition loans, for companies to grow through the purchase of other companies
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From manufacturers to distributors, tortilla plants to tugboat operators, Eastern’s Commercial Banking team works with a range of commercial and industrial companies to help them achieve their goals. Eastern Executive Vice President and Senior Commercial Banking Officer Greg Buscone explains, “We could be providing a loan to assist a company with making an acquisition to help expand, or lines of credit when businesses need working capital to grow.” Buscone recalls a tofu company’s expansion plans, saying, “The business reached an inflection point where demand for its product was outgrowing manufacturing capability in its smaller location. They were looking for a larger building and to purchase specialized manufacturing equipment from Asia. After working with them, they now have a brand new building—with double the manufacturing space—and the special equipment on hand, and the business is better set up for growth.”

While Eastern’s commercial banking team often works with companies through expansions, such as when purchasing equipment or building a new property are top of mind, they are there for businesses through challenging times as well. In fact, Buscone advises, “Sometimes the best time to get a loan for your business is when it’s not needed. An open, communicative relationship with your banker makes a difference.”

Recognizing a Lender That’s Right for Your Business

A best practice for businesses when getting a commercial loan is to dedicate the time to researching and selecting the right lender for your business. Identify a lender that has worked with companies of a similar size and has experience with the level of your financing needs. Understand how your loan amount fits within the bank’s overall loan portfolio.

Location is another important consideration. Have a sense for where your bank is headquartered and where loan decisions are made. This will be an indicator for the bank’s responsiveness, especially when something is needed on shorter notice. Plus, building a relationship with a lender headquartered in your region can provide access not only to a commercial lending team familiar with the area where you operate but also to local decision-makers, helping accelerate the loan decision-making process.

At Eastern Bank, building relationships is at the heart of serving customers and Buscone suggests an important tip for relationship building. He says, “Get to know at least two people at your bank, such as your direct relationship manager who you’ll be working with day-to-day and a Team Leader/Group Head or member of the Bank’s leadership team.”

Help Your Banker Be Your Advocate

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As you get to know your banker, see them as your advocate. When your relationship banker is informed about your business, it is easier for them to champion your business during the loan process. Take for example your financial statements. Be proactive in helping the banker understand your income statements and balance sheets, explaining unique activities and areas where additional context would be beneficial. When net profit is up, keep them informed as to how it was achieved. When gross margins are down, explain why. Context helps lenders be informed about your business and determine the best options for financing. Help them be your advocate. Just as with any relationship, communication is critical.

When applying for a loan, keep in mind some key documents to prepare:

  • Three years of financial statements, including your most current interim financial statements.
  • Accounts payable and receivable documents, to help lenders understand your customers and suppliers.
  • When delivering your financials, add context for your lender on material increases, decreases or other changes that may stand out in your financial statements.
  • Projected financial statements let your lender know where you expect your company is headed moving forward. Give your banker an idea of how you expect the next year to look.

Investing the Time No Matter the Times

Building a strong relationship with your lender is essential to the loan process, and it's something you can and should focus on right from the start.

You may find the best time to get a loan or extend a line of credit is when the business is doing well, and having that established relationship with your lender helps secure approval more quickly. However, during more turbulent times, a strong relationship with the lending team matters just as much—if not more so. In these cases, let your lender know there is a potential downswing on the horizon, or that the business may face a challenging year. Then, your lender can work to offer alternate solutions to get through that tougher time.

Being proactive and building an open channel of communication with your banking team can help to ensure your lender knows your business well, a crucial step to helping your business thrive no matter the times.

Interested in learning how Eastern Bank can help expand your business's success?
 

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