The Subprime Impact on Borrowing

In the last few months the "sub-prime" mortgage problems have received a lot of attention from the media. We are finally seeing how the shakeout of these problems is impacting businesses in a real way.

It seems to me that most of the larger banks in the market have really tightened up their lending practices. They are taking passes on projects that they would have easily approved a short while ago and are much more demanding in the information that they need from a CPA like myself. I don't think the demands that are being made are unreasonable and it does cause a client to really think out their business plan before presenting it to a bank, but the era of easy loans may be over for awhile.

The cautiousness of the large banks has opened an opportunity for some of the smaller banks in the region to fill the void. These banks didn't suffer much of the impact of "sub-prime" and have been very agressive in trying to land business. While they still require a degree of documentation to get a loan done they seem more willing to take a chance on a proposal that their larger counterparts have been. This is almost the exact opposite of the way things used to be where larger banks tended to be willing to take a chance and smaller banks were extremely conservative.

The morale of the story is to be sure to have your ducks in a row before attempting to get financing and be prepared to present your plan to several banks as there's a good chance you might be turned down by a bank or two.