Are Banks Lending to Qualified Borrowers, or Not?

By Jay Goltz

Thank you for your thoughtful and thought-provoking responses to my last post. I believe that we managed to shed some light on the various confusions about the small-business credit squeeze. But not enough. Your comments have raised some interesting questions that I believe need to be answered. I would like — in an admittedly nonscientific manner — to try to figure out what is really going on out there. If not us, who? If not now, when?

Here’s what I want to know: Are qualified small businesses getting bank loans? If not, why not? Is it because they are too small (less than $5 million sales) to get a bank’s attention? We should all want to know the answers, because the banks have our money. Our government officials need to know what is going on.

So here’s my request: Please share your experiences getting a small-business loan in the last year — but only if you are a qualified borrower. Who’s qualified? Here are the criteria we seemed to agree on in the last post (for now, let’s try to set aside discussion of whether these are the right criteria):

1. Good credit rating for both the company and its owner. That means a FICO score of 720 or more.
2. A debt-to-equity ratio of 2 to 1.
3. A debt-coverage ratio of 1.25.
4. At least two years in business.
5. A history of profitability.

What has your experience been? Please start your response with “I meet the criteria …” so that we can keep this focused on the question at hand — whether “qualified” small-business borrowers are getting loans. (Actually, if you don’t meet the criteria but got the loan anyway, that would be worth knowing, too.) Remember, I know this is unscientific. I am not trying to win a Nobel Peace Prize. But this has the potential to be enlightening. Let’s stand up and be heard!

I’ll start:

I meet the criteria. I changed banks in January. Bank of America had no interest in lending me money for real estate at less than 35 percent down. I interviewed at five smaller banks, and they were all very interested in my account. I got proposals from all of them, all of which included a credit line and a real estate loan.