October 17, 2009 by Frank Goley, Business Consultant

Date:  October 17, 2009

Author:  ABC Business Consulting, Chief Business Consultant

Subject:  Business Finance During a Recession- Part One:  Community Banks

Obtaining Business Finance can be challenging during a Recession but there is money out there for enterprising entrepreneurs.  This Five Part Business Finance Blog will provide some real-time, real world finance sources and conduits to help you grow your company, despite the looming recession.

Community Banks:

Recession or not, it is highly advantageous to have solid relationships with Community Banks.  Community Banks are looking for new ways to seize market value with businesses as the large banks falter.  According to BancVue, Community Banks only have 34% deposit market share (Entrepreneur Magazine, July 2009, “Community Banks to the Rescue” by Jennifer Wang).  Look for this to change as small Banks seek to increase market share when big banks are at a disadvantage.Good business means having a good relationship with local, small bank Loan Officers, VPs and Presidents.  Community Banks often take the time to get to know you and your business, giving you a prime opportunity to build a funding relationship, something tough to do with the ever changing ranks of bigger banking institutions.

Troubled Asset Relief Program (TARP): 

Many small banks are obtaining TARP funds to immediately loan to small businesses in their market areas.  Small business is the foundation of our economy and Community Banks understand this. Some examples:

Enterprise Bank in Western Pennsylvania has only one office, three shareholders, $180 million in Assets and $4 million in fresh funds from TARP, plans to make loans with these funds to “fledgling businesses.”

River Valley Bancorporation in Wausau, Wisconsin took advantage of $15 million in TARP capital so they could continue lending.  18 branches in Michigan and Wisconsin.

Virginia Community Bank in Newport News, Virginia was approved for 4.7 million in TARP funds.  A small 2 branch bank.In the last 30 days, small banks have received $164 million in TARP funds, and they plan on growing and lending to small businesses to facilitate their growth. 

Check out your local banks for TARP funding recipients, and you may find a willing lender.  Build small bank relationships!

Reference:  Wall Street Journal, Sat-Sun, June 27-28, “Small Banks not Shying from TARP” by Robin Sidel.

The Do’s and Don’ts when Approaching A Bank Loan Officer: 

Ok, so you want to approach Community Banks for business finance what should you keep in mind?  Mr. Dolphin, Chief Commercial Lender for 21st Century Bank, has the following advice, which from the perspective and opinion of this Business Consultant, can be applied to most banking relationships.  (Reference:  Entrepreneur Magazine, June 2009, “Impress Loan Officers” by Tom Nawrocki).

Things to Do:

Have a solid Loan Package. It also wouldn’t hurt to have a good, concise Business Plan as well.Historical Financials are a must, and they should be accurate, with the Assumptions clearly defined.  Know your numbers!

Things to Watch:

Profit Projections should take in account the current economic situation.  Don’t predict sales to increase in your one year outlook- keep it realistic.  Outperforming is a good thing but over projecting will be penalized.

Don’t keep information from the Banker.  Give the Banker the whole picture and be completely honest.  This builds trust, as well as, gives the Banker the opportunity to help you with problems.

Don’t be wasteful or flamboyant.  A Banker wants a frugal Loan Applicant during a recessionary environment.

Look for the upcoming Part Two of this Business Finance Blog for more ways to obtain funding for your business in this Recessionary Economy.  In the meantime, please visit our Business Finance Section for in-depth, how-to-articles on the multitude of ways to fund and grow your enterprise.  These articles will teach you about how to obtain funding, as well as, where to look and get funding.

We would like to hear your funding stories- what has and has not worked for you in obtaining Finance for your Business.  Your Feedback is appreciated!

Posted in Business Finance.

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