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Banks, Banks…….won’t likely change in the New Year

Remember when banks were the ‘go to’ for start up businesses…..willing to make a bet on the success of companies and offer them a chance…..that was then. Now, they are operating as we approach toward the end of a pandemic. It has offered them the ‘Golden Goose’ – ultra low interest rates that lowers banks’ cost of funds to next to nothing. Paying interest on deposits is almost non-existent for banks. The correct response to promote the economy and small businesses would have been to pass the lower cost of funds to customers through loan rates and reduced fees. But, that sharing would not allow for banks’ ability to build monuments to self in large and ornate branches.

What is happening? Banks have created new and egregious fees for almost anything they want to charge even on deposit accounts, impose ridiculous credit card interest rates and stupid fees, and maintaining the prior (pre-pandemic) existing interest rate charges on outstanding loans regardless of the reality of the pandemic. These were loans issued before the idea of a pandemic existed and interest rates were hundreds of basis points higher, before banks’ cost of funds cratered by these hundreds of basis points, and banks continued to charge as much as possible instead of trying to be a catalyst for the economy. Yes, they were the paper pushers for PPP loans, but all risk assumed by the SBA and significant fees offered by the SBA for paper pushing. Am I too old, or is this gouging and not what banks tried to do in the past to stimulate the economy?

CIWorks obtained a commercial mortgage in 2018 while under duress to close as we approached a deadline we had to meet in order to maintain an earned interest in the property. What did the bank do in return – slapped a 3% pre-payment penalty at the last minute in loan docs. We had also included in our business plan, the desire to construct a solar array on the roof of the building to provide renewable energy power to the building and do our part as to the environment. Three years later…….the bank would not refinance our mortgage although prevailing rates have dropped by 2% because they were too busy; our mortgage has remained current throughout the pandemic; we plan to utilize a state of Massachusetts offered program called Commercial PACE to finance our solar array and the same bank would not cooperate although a Massachusetts program and a Massachusetts chartered bank which effectively could have killed our plans which we shared with the bank; and at our recent re-finance closing on the building with another Massachusetts bank – we were able to reduce our current mortgage interest rate by a full 2%. Then, the bank captured their full 3% penalty – or $48,000. Would you as a small business do business with this bank in the future?

More to come…..

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