Banks vs. Independents

bankAlthough we have rates and terms very similar to their banks, many times our customer decides to use their bank as it is easier and they already have a line and relationship established with them.

Really can’t argue with that too much as a good banking relationship is priceless in business.

I would like to point out that spreading your company’s risk is also priceless and before running to the bank for all your financing needs, maybe one should look at its options before signing on the dotted line.

Banks are a great resource to get money and once a relationship is established it is easy just to call them up and get it most of the time. And when the relationship is good they can beat anyone’s rates to keep the customer. But I would like to tell you it might be better, even if you pay a little more, to finance your equipment loans outside your bank.

As I have said before, a bank line of credit is priceless and you would want to keep it if you could get it and financing equipment with them may actually hurt your company in the long run. Let me explain.

When your bank looks at you and your credit, they are looking at their total exposure with you. That is to say, your bank line, plus any equipment financing, plus any credit cards, vehicle loans and/or building loans, etc. They will have a limit on what they feel comfortable loaning you. So why push it?

Since the most important thing you can get is a credit line, why not protect that? Only use your bank for that. As you grow, you will want or need your line of credit to grow with you, but if you have added all these other debts with the bank, they may not want to grow any more with you and will end up asking you to find another bank.

Now, if you just used your bank for the line of credit, another bank for your building loan, auto companies for auto loans, truck companies for truck loans, credit card companies for credit cards, and other financing companies for equipment loans I would tend to argue that your banking relationship will be stronger.

So spread the risk around.