The banking industry sometimes receives undeserved negative reviews among small business owners. Especially in the current climate of tightening credit standards and lending policies, business owners should understand which banks lend what amounts to whom and when.

Some banks will not touch a loan below $1 Million. Therefore, if you want a line of credit for $100,000, soliciting those banks will prove futile. Other banks, typically very small community banks, will not provide a loan above $1 Million. Why? Banks have loan capacities. This refers to their typical largest loan size and the maximum amount they will lend if everything lines up perfectly.

If a particular bank has a general loan size limit of $3.5 Million and you need a loan for $3 Million and have plans to increase your loan amount over the next 18 months to $5 Million to pay for your business' expansion, approaching that particular bank for a loan will not prove beneficial. Assuming you qualify, the bank will likely approve the $3 Million loan but not the increase meaning you will need to shop for another bank in six to nine months. Save yourself the hassle and approach the banks with general loan size limits of $6 Million and higher for your business banking needs. Unfortunately, only a few banks explicitly state the profile of their target client or loan size. The rest is knowledge garnered only through research and relationship building or by simply asking the appropriate bank personnel.

Banks maintain loan portfolios and track financial transactions. If a few of a bank's clients in a particular industry recently defaulted on their loans, that bank will restrict its lending to other companies in that industry and sometimes, sister industries. In addition, if a bank reaches a heavy weighting in a specific business category such as residential construction and home building companies, to adjust its portfolio lending the bank will often restrict or deny all loans in that category for the remainder of the fiscal year. Thus, with a number of banks having been hard hit by the demise or financial distress of home builders due to the drastic reduction in new home sales, as a commercial construction or related company, it is worthwhile to inquire about the bank's residential builder exposure and finance options. Many of these banks are not in a position to lend sizable amounts of money and do not publish this information but generally will acknowledge their exposure when questioned.