Whether you”re a one-location mom and pop shop, or a serial entrepreneur, the secret to securing credit in 2011 is your company”s overarching story.# Banks are evaluating the whole picture – ranging from your balance sheet to your vendor base, customer supply chain, cash flow, collateral and yes, company management.
Lending for small businesses is up at many financial institutions. GBJ spoke to several local bankers who are ready to roll out the dough for the right opportunities – but performance history is what you”re going to need before they sign on the dotted line for your small business loan.
Most lenders” first step is evaluating the management of the company and their history of running their business over the years – not just the last 24 months. Cash flow is the primary source of loan re-payment, so all banks and credit unions take a good look at performance.
“If the company has a record of performance that goes beyond this last cycle, that”s what we start off with, that”s what we evaluate,”# says Will Thatcher, senior vice president and business banking executive for Georgia at Fifth Third Bank, which has 25 locations in Georgia. “We have them tell us their story. And then, we try to understand the journey they”ve been on.”#
But does a business have to be asset heavy to secure a loan these days? Not necessarily. “If they have a good track record and the ability to service their debt, whether it be long or short term, that”s the most important criteria,”# says Jim Pope, president and CEO of KeyWorth Bank, a community bank with three area locations. “We look at the security of the collateral secondarily.”#
Fifth Third looks at the reliability of the company”s vendor base, their customer supply base and, of course, the balance sheet. “It doesn”t matter what kind of company it is, the balance sheet is the history of the business,”# Thatcher explains.
At Gwinnett Federal Credit Union, which has serviced 30,000 members across five counties for the last 50 years, there is a full process of underwriting that examines the cash flow of the business, as well as the global cash flow. “In many instances we are dealing with entrepreneurs who have multiple companies,”# says Marshall Boutwell, CEO of Gwinnett Federal Credit Union. “We have to look at the total picture to make sure they have sufficient resources to take on this additional debt.”#
“If the company has gone through a rough spot and the collateral is not quite what we want, but they have a strong balance sheet, it doesn”t mean it”s a bad loan. It means we have to be a bit more creative as to how we go about it,”# says Thatcher.