Published 4/8/2016 in The Maryland Daily Record
I have been a retail customer of a large bank since 1997 and became a business banking customer of the same bank since starting my business in 2009. As a new startup, I was able to establish a working line of credit soon after, which turned out to be a tremendous asset. This line has allowed me to smooth out the timing of our income stream and better manage the cash flow needs of the business.
Recently, the term of the line of credit expired and I had to reapply for a new line. After completing the application process, I learned that we were approved for only 60 percent of the amount we requested. This resulted in a loan amount of less than we were given five years ago, when the business was in a much less established position.
The experience of accessing credit for my business has been frustrating and disappointing. When we have been able to secure a line of credit, there are often terms, conditions and fees that make it highly unfavorable to utilize the funds. I have gone through the process with a huge global bank and decided that we couldn’t possibly be treated worse so I tried a regional bank, thinking that there is a commitment to local business. Surely, the smaller banks care more about helping support business growth within their communities.
Unfortunately, I learned that the regional bank fee structure was even worse and more punitive to a small business. This search brought me back to the big bank and my disappointment in receiving this lower amount of approval for the working line of credit for which we applied. There are a few key areas where I think the bank missed the mark:
1. Health of business
Every year since the start of our business, revenues and profitability have grown. Our cash on deposit in our account has also grown every year, yet almost seven years after starting this business banking relationship, we were approved for less than when we started.
2. Business needs
The purpose of the line of credit is to support salaries of new hires that we need to keep up with the demand for our services. Our financial planning practice has an active receivable balance at all times yet our staff needs to be paid biweekly. This expanded line will allow us to hire the level of employees we need with less concern for meeting cash flow demands to provide this income. This reduction in our line will limit our ability to do this in a meaningful way, ultimately slowing down the pace of our growth. The slower we grow, the less revenue we will generate – resulting in less on deposit at the bank. None of us benefit from this approach.
3. Consistent track record
For all of the years that we had our previous line, we paid on time and in full. We have demonstrated a strong track record as customers of the bank and expected some recognition for our existing relationship.
4. Woman-owned business
Throughout financial services and banking we hear a lot about attracting and retaining female customers. Given our strong track record for growth and the fact that we are woman-owned, it is extremely disappointing to receive this reduced amount of the requested line of credit. When given the opportunity to support the growth of a woman-owned firm that provides financial planning and investment management to women, the bank’s actions exemplify the disconnect between lip service to that goal and actually delivering on those promises. On balance, the difference in loan value to this bank’s risk balance sheet is insignificant, yet to a growing business like mine, it is a game changer.
I read a story about a woman-led bank in Maryland and plan to reach out to the CEO to find out if their practices are any different. It is obvious from the amount of sponsorship that banks do that they care about attracting and retaining customers, yet, somehow, our thriving business continues to fall through the cracks.
My confusion about this experience has only been made more puzzling by the countless examples of my male counterparts who seem to be able to secure financing more easily and with less catches.
I chalk this up to part of the life of an entrepreneur. We constantly manage one thing after the next yet months after this experience, the frustration and inequity of the circumstance are still lingering with me. I don’t often focus on the disparity that exists for women business owners, but this is one blatant example that needs to be brought to light. I can’t imagine that I am on the only women-led business that is facing this obstacle.