Enterprising Women Vol 10, No 2, 2009

enterprising Women 45 B Y MAR S HA F I R E S TONE , PhD DR. FIRESTONE: In previous articles I have stressed the importance of professional advisors to help guide your business. In dealing with company finances, a certified accountant can make informed recommen- dations based on the past and future finan- cial plans of the business. Whether starting or growing your busi- ness, it is important to finance it in a way that works best for the business. A company may look into debt financing, using venture capitalists or angel investors, but recently the most popular topic has been about securing and applying for bank loans. In speaking with Holly Hinchey, senior vice president for Wachovia Business Banking and Maria Coyne, executive vice president at Key4Women, small business owners should be prepared, knowing which docu- ments to examine and how procedures have been modified in applying for a bank loan. WHAT NEEDS TO BE IN ORDER? Hinchey emphasizes that now more than ever it’s so important to be fully prepared. Make sure that your package is complete and your information is correct and up-to- date. Your data tells a story and you want it to be the right one, and one that is accurate and credible. Business owners need to demonstrate to their bankers that they run the business by the numbers , understand where their expenses and revenues come from and actively manage their cash flow. “The more years of financial history and financial state- ments you have the better,” Key4Women’s Maria Coyne advises. Most importantly, CEOs need to use their financial reports to manage the busi- ness. All reports should be reviewed at least once a month. WHAT MAKES ONE BUSINESS MORE ATTRACTIVE FOR A LOAN THAN OTHERS? Both Coyne and Hinchey agree that a business showing it is well capitalized with solid cash flow and strong guarantees will always be more attractive to financial insti- tutions. Banks are looking for owners who have experience in their industry and who have the wisdom to survive tough times. Our experts advise that you should be open to alternatives. It is more difficult now to obtain a loan so you need to work with and be open to suggestions from your finan- cial advisors that could be more effective for your company. HAVE GUIDELINES CHANGED SINCE THE STIMULUS PACKAGE? “What is new since the stimulus and still not well understood by the general public is that even banks that participated in the Capital Purchase Program (and it is NOT a bailout) and even strong banks have expe- rienced a sharp rise in the cost of capital. Capital is the raw material that banks use - so like in other businesses where the cost of goods to be sold has gone up, so too with banks,” Coyne says. Although economic realities are harsh, Hinchey advises that now might be the right time to consider an SBA loan as the govern- ment has made significant improvements including: • The temporary elimination of SBA 7(a) guaranty fees • Interest rates are at an all time low • SBA products offer longer amortizations which will lower your monthly payments • 90 percent financing is available on com- mercial real estate projects. This will keep operating capital in the business • The SBA 7(a) product lets you blend the use of the loan proceeds which can include: purchasing the building, buy- ing the business, making building/ space improvements and adding in needed working capital. A bank loan may not be the best financ- ing choice for your business, but knowing the procedure as well as potential risks and benefits will help you make the right decision. When looking to finance your business, know the level of control that you need to keep and what you can afford to leverage before going into meetings. You should be comfortable with not only your financing solution, but the future of your business as well. This is a difficult climate for lending, but not one that is insurmountable. Building a strong relation- ship with your banker is invaluable and should be an important outgrowth of your work on obtaining credit, even in today’s environment. MARSHA FIRESTONE, PhD is the founder and president of the Women Presidents’ Organization (www.womenpresidentsorg. com ) and a member of the Enterprising Women National Advisory Board. She can be contacted at 212-688-4114 (e-mail: Marsha@womenpresidentsorg.com) . Securing a Bank Loan to Grow Your Business Q U E S T I O N What steps should I take to increase the likelihood that I might obtain bank financing for my business?