How to Successfully Execute Your Strategic Plan

PLAY BALL!
How to Successfully Execute Your Strategic Plan
Plan, Practice, Play – three small words that pack a lot of heat and directly impact whether you have a winning or losing season. We are now in the final “PLAY” stage of our 3-part column on strategic planning. Regardless of the game plan and practice drills, it always boils down to how the coach leads and players execute on the field – just like in the real world of your business.
In part one of our three-part strategic planning series we covered The Game Plan of Winners, which stressed the importance of planning for the future, carefully observing the daily operation of your company, and drafting specific actions to achieve business objectives. In part two, we discussed the importance of Spring Training, a time devoted to practicing and perfecting your game plan through strategic exercises including a SWOT analysis (strengths, weaknesses, opportunities and threats) to help identify priorities and then translate them into manageable, measurable actions steps. In this final step of strategic planning, it’s time to get things in motion – time to play ball – time to Execute.
Even the best strategies fail without execution. Larry Bossidy and Ram Charan, world renowned business leaders and writers, contend that execution is the bridge between aspirations and results. The ultimate difference between a company and its competitor, in fact, is its ability to execute. You have taken the time and energy to properly assess the current situation and create real customer-focused plans so don’t get distracted by day to day issues, stay focused and disciplined to meet the opposing team head on, execute what you have planned and practiced, and own the winning score.
Start at the heart of your company (your team) and roll out the plan in a systematic way.
1. Clearly define and clearly communicate the strategic plan to key stakeholders and include:
• Goals and objectives
• Roles and responsibilities
• Timelines and due dates
2. Ensure all work flow is aligned with strategy and the team has necessary resources and skills to succeed
3. Track, measure, and report progress on a regular basis
4. Reinforce behaviors that support the desired outcomes to motivate staff and fuel momentum

The key ingredient is quality communication. Embedding the message of disciplined execution in the hearts and minds of your employees and guiding them toward a shared vision requires consistent, clear and repetitive communication. You are the leader and coach and have the responsibility to facilitate and encourage constructive lines of communication. Employees who are well informed become more engaged and produce better results.
Make sure work processes are aligned, complimenting and supporting one another and that proper procedures are in place to support work flow. Track, measure, and report results so you can keep score on what’s working well and what needs improvement. Ensure that your incentive systems are integrated with your strategy and company goals; and, remember to recognize achievement to keep employees motivated and drive momentum.
Finally, keep in mind as you move forward through the implementation of your strategic plan that execution is a process, not a single and final step. There is no clearly defined beginning or end, so be dynamic, flexible, and forward-thinking. Developments such as technology, procedures, economic conditions, and demographics will continue to change and consequently, you will need to alter your strategy and execution accordingly. Work to keep up with the times and these changing variables, while maintaining the company with the principles you originally built.
There’s no hiding the fact that strategic plan execution is hard work. It requires quality communication, assertive strategic alignment, team development, and managing time to prioritized activities. But, when you start seeing your team achieving desired results, cruising through a winning season, it makes all that hard work – worth it.

Best wishes for much success in executing your “real world series” strategic plan.

FDIC raises insurance coverage to $250,000

FDIC: Dodd-Frank Permanently Raises Insurance Coverage to $250,000
The FDIC reminded bankers yesterday that the Dodd-Frank Act permanently raises the current standard maximum deposit insurance amount to $250,000. That coverage limit applies per depositor, per insured depository institution for each account ownership category, the agency said. The standard maximum insurance amount of $100,000 had been temporarily raised to $250,000 until Dec. 31, 2013.

The Game Plan of Winners

Creating a strategic plan seems like a daunting task and so, too often we rely on a “wing and a prayer” to meet our business objectives. Breaking the task into manageable bite-size steps can overcome the hesitancy to just do it.
This article is the first in a 3-part series on strategic planning in an effort to:
1) Demonstrate the importance of a strategic plan
2) Provide guidance on how to create a plan
3) Stress the role of execution

It is meant to help you tackle the project and hit one out of the park for your business.
Who comes to mind when the concept of strategic planning is discussed – Peter Drucker, Henry Mintzberg? I’ll bet it’s not Paul "Bear" Bryant, Alabama’s legendary football coach and it certainly isn’t baseball legend, Yogi Bera. Yet, these two sports standouts provided more salient thought on the topic than most other “experts” because strategic planning is really about having the right game plan in place combined with the right team members to execute the plays.
Bryant succinctly described his formula for winning this way: 1) Surround yourself with people who love football, 2) Recruit winners, and, 3) Have a plan for everything.

Business executives universally seem to understand the need to acquire talented employees and I’m sure in your office you have built a team of dedicated, competent, courteous professionals to care for your clients. But, the critical difference between winning and losing, between success and failure, between high performance and mediocrity is often dependent on your willingness and ability to define and execute an effective business plan. Indeed, Bryant’s comments sum up his feelings that good planning is the key to victory, "Have a plan. Follow the plan, and you'll be surprised how successful you can be. Most people don't have a plan. That's why it's easy to beat most folks."

For his part, Yogi came at the subject in his own inimitable way. Most of his comments sound idiotic at first, but his witticisms are actually very clever, full of insight, and very applicable to business. Yogi once said, “If you don’t know where you’re going, you’ll wind up somewhere else.” What a great argument for planning – setting a fixed direction and avoiding the inevitable drift that occurs when you don’t set a course in a fixed direction.

What both of these sports legends seem to know intuitively, and most of us have to learn is that only effective, efficient strategic planning can take your business to the level of performance you desire, especially during economic times as difficult and challenging as today.
But, just having a plan is not enough. Without incorporating a detailed set of tactics within the plan it will be difficult to execute. Further, the best strategic plan in the world won’t move your business ahead one inch if you don’t effectively communicate and reinforce it.

Having a strong plan for your business, means you and your employees know how their work contributes to a defined objective. The team will work together with energy and enthusiasm because they know how success is defined for each respective job and ultimately for the practice as a whole.

Yogi also said, “When you come to a fork in the road, take it.” In other words when you come to a place where you need to make a decision, don’t hesitate. Determine to develop a strategic plan, communicate it, reinforce it and your business will benefit from your discipline.
Stay tuned for “Spring Training” – guidance on how to create a plan…

The New Definition of Convenience…Enhanced by Relationship

It’s the modern-day driver of business improvement and has an impact on everything from business management to client interaction. Convenience is defined by expectation, influences how fast issues can be resolved, and is key in building a successful business.
The tools of the trade are heavily influenced by the demand for convenience by both entrepreneurs and their customers. In today’s fast paced society, we are all accustomed to instant gratification and real time results whether reviewing a customer order immediately or proposing an important relationship to a prospect. The expectation for the elusive convenience serves as the impetus for the development of services and products to support improved delivery. Today, computers and imaging technology deliver information more quickly and directly to the office. Customers experience faster, more accurate results. Appointment scheduling, order fulfillment and billing are processed at the push of a button. Technology can be our friend. But convenience is not just about technology and speed.
Convenience is also about a direct route to an empathetic listener rather than a voicemail prompt; a willingness to work through lunch to accommodate a client emergency; a knowledgeable and trustworthy referral for handling more of your clients business needs. In other words, having a relationship with a business or service provider who cares is convenient for the consumer. It saves them time, aggravation, worry, research, and maybe even money.
Business professionals like convenience, too. As service providers and often times business owners, too, convenience is a priority and has an enormous impact on quality of life. State of the art advancements in technology provide convenience and promote efficiency in customer care. And now, state of the art banking technology is available to manage your business more effectively. Banking can be done anytime – during evening or weekend office hours or at 6:00 a.m. – at the push of a button from your desktop.
“Remote Control Banking” is the term MileStone Bank uses to describe a convenient system they have customized for our business customers to help improve the bottom line. The special business package includes everything from free checking, free worldwide ATM access, courier service, online banking and online bill payment plus cash management to maximize cash flow. And now, with recent advancements in check imaging, MileStone Bank provides a safe and secure check scanning system to business banking clients so there is no need to leave the office to deposit checks – instead, simply log in to a secure, password protected website, feed checks into a special scanner, verify the total, and click “send”. It’s that simple and convenient and allows next business day availability for deposits made via Remote Control by 8:00 p.m. the previous night.
Just like technology is not the only definition of convenience for meeting customer needs, the same is true of business owner’s expectations for banking. Having a relationship with a knowledgeable, experienced banker who specializes in the business banking drives convenience as well. Amidst the changing financial landscape of today there is still a much desired need for personalized banking from a professional that understands economic and financial trends and the nuances of running a business. Nothing can replace the ear of a trusted business advisor when contemplating business expansion or the acquisition of another business or the voice of a personal banker to responsively meet operating account needs. At MileStone Bank, we bring the bank to you by coming to your office when needed; a real person answers your phone calls; a responsive banker services your requests promptly. So, take heart – you can have real time convenience and genuine relationship – still.

CHOOSE RIGHT WHEN THE ECONOMY IS TIGHT

Business professionals know all too well that pulling together the most competent, caring and professional staff is vitally important to their growth and success. Equally important, but perhaps not as obvious is creating a team of knowledgeable, accessible and dedicated business partners. Not the type of partners that actually work at your company, but rather business partners such as attorneys, accountants, insurance agents and bankers. These relationships are the key to creating the business foundation from which your company is operated. Most business professionals have attorneys and accountants that were chosen through referrals and based on proven expertise. Unfortunately, all too often bank partnerships are chosen differently - based on geographic proximity or rates rather than effectiveness, shared business philosophy, and real value-driven convenience.
Developing and maintaining a relationship with the right banker has never been more important. An entrepreneur’s relationship with his or her banker is best when built on mutual trust and respect and based on value not price. The old adage “you get what you pay for” is applicable to most things in life and a business banking relationship is no exception. It may cost a bit more for a banker who is truly a valuable business advisor rather than simply an order taker, but it’s worth it!!!
Specific value that a banker can add to the business relationship, especially today, is to advise clients on how to choose the most appropriate financial services i.e. checking and savings accounts, and how to expedite the borrowing process for equipment loans, working capital lines of credit and mortgages to acquire offices, manufacturing or storage space or to start, purchase or expand your business. The right banker can allay fears and eliminate confusion that is compounded in today’s economy of tight credit.
Credit is absolutely available today (to qualified borrowers); and, the role of the professional business banker helps business owners demonstrate qualifications by guiding them through the credit process as outlined below:
· Be prepared to discuss the amount of the loan and its specific purpose (to purchase assets, consolidate debt, fund operating expenses, buyout a partner, etc)
· Identify desired loan repayment term and the collateral being offered to secure the loan
· Provide 2 -3 years of business and personal federal tax returns as well as business and personal balance sheet (personal financial statement) to facilitate the assessment of the financial condition of your business, past, present and projected future
Because lending money is all about managing risk, a good bank partner will evaluate risk completely and advise accordingly in the best interest of the bank as well as the prospective borrower. Beyond the quantitative information above, an experienced banking professional will also evaluate a loan request against the following qualitative criteria commonly known as “the 5 C’s of credit”:
1. Character – Business and personal character, integrity, reputation and credit history
2. Capacity –Sufficient business and personal cash flow available to make the payments and repay the loan
3. Capital –Sufficient business and personal cash for a down payment and for a cushion in case business gets slow
4. Collateral –Assets to secure the debt such as real estate, equipment, A/R or inventory
5. Conditions – Condition of the borrower, the borrower’s industry and the general economy
Make sure to choose your banking partner wisely. The right choice will ensure readiness that will improve chances for loan approvals and also provide guidance on smart structuring of deposit accounts and delivery systems to maximize business growth and success – even when times are tough.

“You Can’t Cut Your Way to Greatne$$”

What you believe will influence how you behave – true of many things – including beliefs about the economy and how you respond in your business. Recently an informal survey asked business owners their opinion of the U.S. economy and how it’s affecting them. Approximately one half of people surveyed expect the economy to improve over the next six months. Despite the continuation of the recession, many people feel the panic seems to be over. Improving trends in unemployment, national inventory, manufacturing and housing reports have provided a glimmer of hope for better times. Puzzling, however, is the fact that even though survey respondents feel confident their business will experience stability or small growth over the next twelve months, most of them cited their top priority is cutting costs. It is wise to cut the fat in today’s economy, but business owners should beware of cutting so deep that the business will bleed to death.

This is especially true when it comes to eliminating marketing efforts to save money. Amidst loss of jobs and the dismal economy, many customers choose to postpone or eliminate big purchases. By staying in touch with your customers, the importance of your product can be reinforced. You can stay top of mind with your customers by reaching out to them a minimum of 3 or 4 times a year. Simple contacts can be done inexpensively and will have an impact on customer loyalty and may even generate referrals to help your business grow.
If you’re struggling with cost-effective ways to stay in touch, start with the obvious by sending a hand written message vs. using generic post cards. Extend congratulations to new parents. Send a note to ask customer Jones how he is enjoying retirement. Have your office assistant review the local paper for customers that have made an accomplishment and send a note card with a few sentences to let them know you’re proud of them. Get creative with ways to stay top of mind and deep in the hearts of your customers.
While some businesses may find it counterintuitive to spend money (on marketing) while making less money building a business depends on building a “brand” which is a long-range strategy, not a short-term fix.
And remember…you can’t cut your way to greatness.

What’s Right and What’s Wrong with Obama’s Regulatory Reform Plan

How can our economy remain competitive and thrive if its businesses, including financial institutions, don’t bear the brunt of their poor actions and decisions? It can’t. But that’s exactly what is happening now as our government props up the Wall Street institutions that created economic calamity. We need not only a return to traditional financial standards and free market discipline but to downsize the Wall Street megabanks to eliminate the threat any one institution can pose to our nation’s entire financial system.

Common sense tells us that no financial institution should ever become so large and powerful that it becomes too big to manage, too big to regulate and too big to face judgment in the marketplace. Nevertheless, for years policymakers have sanctioned and approved too-big-to-fail financial corporations. Now they’re using hardworking Americans’ tax dollars to keep those institutions afloat.

As guardians of Main Street, community bankers nationwide have long urged an end to too-big-to-fail. For years, our pleas to put taxpayers and our nation's financial well-being above the interests of individual entities fell on deaf ears. It was only in the wake of the financial-markets crisis that policymakers could no longer ignore what seemed so obvious to the rest of us. Now the Obama administration and Congress are beginning to address the serious problem of too-big-to-fail institutions through the administration’s financial regulatory reform plan. While parts of the plan provide a good starting point, there is still more that can be done to ensure we don’t repeat this crisis.

Community banks support provisions in the administration’s plan that create a consolidated systemic-risk regulator, impose higher capital and liquidity requirements on too-big-to-fail institutions so they can better absorb losses when they stumble and give the FDIC special resolution authority to unwind and resolve systemic risk firms that fail. However, to protect taxpayers and our economy, we need regulations to downsize the megabanks, require firms that pose systemic risks to pay into a separate systemic-risk reserve fund that can be used to unwind mega-institutions when they fail and impose a special FDIC systemic-risk premium for the extra burden the largest banks place on the Deposit Insurance Fund.

Another part of the plan threatens to undermine the way community banks successfully serve their customers and all of Main Street America. The proposed Consumer Financial Protection Agency would have far-reaching powers over bank products and services provided to customers. Unfortunately, the agency as currently proposed would hurt, not help consumers.

Community bankers agree that we need to close existing regulatory gaps and safeguard consumers from abusive and improper practices. After all, we have always put the best interests of our customers first. In doing so, we pride ourselves in offering our customers the safest and most sound products and services in the marketplace. The proposed agency, by separating consumer policy from safety and soundness supervision conducted by bank regulators, would create more regulatory confusion without improving consumer protections. Those increased regulatory costs would be borne by all consumers, making many financial products and services more expensive for all Americans and perhaps not affordable to some.

Community bankers work with our customers to ensure that they’re well informed about the products and services they choose and that they are capable of managing them. So why should community banks and their customers be punished for the deceptive practices of others?

Instead, a more targeted approach to fixing the real problems of our financial system lies in focusing on too-big-to-fail institutions. By implementing measures to regulate giant financial firms and reduce the risks they pose to our economy, Congress can begin restoring citizens’ faith—and essential free-market discipline—in our nation’s financial system. We must ensure that any new regulatory regime addresses too-big-to-fail institutions while implementing meaningful consumer protections that will not disproportionately affect the community banks that did not contribute to the current economic crisis. We must get it right for the long term—future generations of Americans are counting on us.

Press Release - MileStone Bank issues 20% stock dividend

DOYLESTOWN, PA – August 4, 2009 - The Board of Directors of MileStone Bank of Doylestown has authorized payment of a 20% stock dividend, according to John C. Spier, Chairman of the Board. Shareholders of record on June 30, 2009 will receive one share of common stock for each five shares they own, payable on August 15, 2009. This is the first stock dividend for MileStone Bank, established in November of 2007.

“After careful consideration, the board determined a stock dividend was appropriate based on the bank’s overall positive performance as measured against our business plan and the performance of our peers,” said David Gill, President & CEO. “We’re happy to issue this dividend as delivery on our pledge to provide increased value for our original investors, and proof of our continued commitment to create the well regarded, high performing financial institution promised to our shareholders and clients.”

Capital levels for the bank remain strong with a Tier 1 Capital Ratio of 15.64% and a Total Risk Based Capital Ratio of 21.37%, as of June 30, 2009.

MileStone Bank is a community bank headquartered in Doylestown, PA. MileStone Bank is led by co-founders David Gill, President & CEO, and Elijiah Gray, CFO.

Disclaimer
This report contains certain "forward-looking statements." The Company desires to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 and is including this statement for the express purpose of availing itself of the protection of such safe harbor with forward looking statements. These forward-looking statements may describe future plans or strategies and include the Company's expectations of future financial results. Forward-looking statements are subject to a number of risks and uncertainties that might cause actual results to differ materially from stated objectives. These risk factors include but are not limited to the effect of interest rate changes, competition in the financial services market for both deposits and loans as well as regional and general economic conditions. The words "believe," "expect," "anticipate," "estimate," "project," and similar expressions identify forward-looking statements. The Company's ability to predict results or the effect of future plans or strategies is inherently uncertain and undue reliance should not be placed on such statements.

Marketing your Business

The economy and its impact – the topic that “keeps on giving” literally! But take heart - in the midst of the housing and employment struggles, bailouts and bankruptcies there are absolutely opportunities to sustain and even grow your business. Maximizing those opportunities requires solid marketing efforts. The notion of marketing in a downturn is counterintuitive to many because they view marketing as an expense and are therefore cutting back marketing budgets in search of cost savings. The wiser business professionals, viewing marketing as an investment, have a decided advantage. They proactively and strategically intensify marketing efforts when business slows - not necessarily by spending more money on advertising, but by focusing attention on perhaps the most significant marketing tool available - the customer experience.
Marketing done right is a systemic, company-wide effort that strives to develop lasting relationships by meeting the emotional needs and wants of clients and creating a positive outcome. It’s not about selling more products to clients, it’s about genuinely understanding the client, and providing what they truly need.
And, systemic marketing requires everyone in the office from the bookkeeper, receptionist, sales person, and the business owner to invest in the customer experience. It begins with the initial client contact to schedule an appointment. Both the obvious and the not-so-obvious things leave an impression and influence the client’s desire to do business with you again or refer another person. The professionalism, competence, and interpersonal skills of staff, look of your office, even bathroom cleanliness and office signage have an impact on client satisfaction. Now is the time, while business is slow, to prepare your staff for their role as marketer. As the leader of this effort, make the commitment to clearly define and clearly communicate standards for marketing the comprehensive and ultimate client experience to exceed their expectations.
To get started, here are some basic suggestions:
1. Clients want assurance. Ensure your staff is courteous and competent, treats the client with respect and instills confidence that the quality of their experience is the number one priority

2. Clients want responsiveness. Teach your staff that the client is not an interruption, but rather the reason for the existence of the business and their respective jobs. Help employees understand that the client is the “real boss” and they should be prepared to promptly take care of their needs.

3. Clients want reliability. Make sure you and your staff complete tasks and fulfill requests correctly the first time i.e. calling when you say you’ll call, following-up on unresolved issues, and promptly informing them when you are unable to provide something

4. Clients want a comfortable environment. Assign responsibility to inspect the office regularly to make sure it’s user friendly, organized, clean and professional.

Proactive marketing in the current reality doesn’t have to cost a lot. Simply build awareness and sensitivity within your staff to be attentive to the needs and wants of clients, and then provide the highest levels of service and responsiveness. You will experience improved customer retention, an increased number of referrals, and another surprising perk – a happier workforce that is engaged in process of building success.

Best wishes in your marketing efforts!

Bank Deposit Accounts vs Money Market Funds

Great Article in the Wall Street Journal today about savings rates.
Bank accounts may even be more secure than other options, since bank deposits are insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor, a limit recently extended to 2013. While money-market funds are generally very safe, the insurance program set up after the financial crisis covers only investments that were there as of Sept. 19, 2008 and is set to expire this September. See the full article at: http://online.wsj.com/article_email/SB124398655282979357-lMyQjAxMDI5NDAzMzkwODM2Wj.html#printMode

Community Banks: Still Safe & Secure

The Independent Community Bankers of America (ICBA) and MileStone Bank are reminding community bank customers of the extraordinary stability of the community banking industry as the troubles of large Wall Street financial institutions and investment firms dominate mainstream headlines.

“Our customers may be watching the news and reading the papers and naturally, they worry about their own banks,” said Dave Gill, President & CEO of MileStone Bank. “We understand their concern, but want to reassure our customers that they need not worry about the stability of their bank and the safety of their money.”

“These are challenging times for our nation’s economy and financial system – one of the most challenging in many, many years. We have seen the failure of some large financial firms and investment banks,” said Cynthia L. Blankenship, ICBA chairman and vice chairman and chief operating officer of Bank of the West, Irving, Texas. “However, the challenges are primarily on Wall Street, not Main Street, and investment banks are not commercial banks or savings institutions. The reality is there are more than 8,400 commercial banks in our country and insured deposits are safe in an FDIC insured institution. No depositor has ever lost a penny of FDIC-insured funds. Investment banks are not FDIC insured.”

Under the Emergency Economic Stabilization Act of 2008 (H.R. 1424) enacted Oct. 3, deposits held in FDIC-insured community banks will be guaranteed by the federal government for up to $250,000 through Dec. 31, 2009. Starting on Jan. 1, 2010, deposits held in FDIC-insured community banks will be guaranteed for up to $100,000 per depositor, and $250,000 for certain retirement accounts.

“When it comes to community banks, the vast majority have been and continue to be some of the safest, soundest and most secure financial institutions in our nation,” said Blankenship. “Community banks follow responsible business practices. Community banks are risk-averse; they are sensible businesses that work every day to support their customers, communities and local markets.”
“We encourage customers to call us if they are concerned,” said Dave Gill of MileStone Bank. “We value our relationship with our customers and our communities, and we want everyone to feel secure—both now and well into the future.”

Learn more about MileStone Bank at www.milestonebank.com

Hope for tomorrow......

There is hope for a better tomorrow and the banking system (at the local level) can and will be a big part of recovery.

Local level community banks are owned and operated by people you know and trust rather than a foreign country that is far removed from your reality. Community bankers go to the same Little League fields and dance recitals as you and they care about the well being of families, businesses, and the neighborhoods you share. Community banks’ sponsorships and donations to local organizations are generous; and, upstanding bank officers’ volunteer service and leadership have a far-reaching impact on building healthy communities. Beyond their “heart”, community banks, for the most part, are well capitalized and in a strong position to provide a safe place for saving and borrowing money.

As individuals become more fiscally responsible and conservative, good old fashioned savings accounts and certificates of deposit provide a guaranteed principle, safe and secure option. Deposits are insured by FDIC for up to $250,000 or more (depending on account titling). In addition to providing safety, soundness and interest, those same deposits fuel business growth within the local community. Community bankers have wisdom, knowledge, experience, and integrity. They are familiar with their borrowers and the marketplace which enables them to make sound decisions. Community banks connect community people to community businesses by providing loans that fuel the economy, create jobs, and sustain growth.

Don’t forget that you, too, play a role in recovery:
· Choose to fuel the economy by placing your business and personal deposits in a local community bank
· Choose a bank that understands and supports your industry
· Choose a banker that that is qualified to be a business advisor and cares enough to be a partner to help you enhance your practice and your patients’ experiences
· Choose to be part of the solution

Make the most of your FDIC guarantee - How to be sure your deposits are fully insured

Your banker should be able to help you determine FDIC insurance, but here is a great link to the FDIC website:

http://www.fdic.gov/consumers/consumer/news/cnwin0809/guarantee.html

What you need to know about getting a business loan

Developing and maintaining a relationship with your banker has never been more important. Most businesses rely on their bank for essential services such as checking & savings accounts, equipment loans, working capital lines of credit and commercial mortgages. A business owner’s relationship with their banker should be built on mutual trust and respect and based on value not price. The old adage “you get what you pay for” is applicable to most things in life including a business banking relationship. It may cost a bit more for a banker who is truly a valuable business advisor rather than simply an order taker, but it’s worth it!!!
A specific value that a banker can add to the business relationship, especially today is to educate their clients about what is typically needed when applying for a business loan. Most business owners are unsure what bankers are looking for when evaluating a loan request. That confusion can only be compounded today by all the talk of tight credit. Credit is absolutely available today. In order to avail themselves to it, business owners should be aware of the process that goes into considering a loan request and the type of information and documentation they will be expected to provide.
When a business owner is seeking a loan they should be prepared to discuss:
1. The amount of the loan
2. The purpose of the loan– to purchase assets, payoff old debts, fund operating expenses, buyout a partner, etc
3. The security being offered for the loan – collateral such as real estate, equipment, inventory, accounts receivable, stocks, bonds, etc
4. The term of the loan – how long will it take to repay the loan
5. The company’s financial condition – past, present and future
The banker will typically look for documentation to support the loan request and measure the relative financial health of the business and the principals…documentation such as:
1. Federal tax returns (2-3 years) for both the business and principals
2. Year-end financial statements (2-3 years)for the business
3. Year-to-date and projected financial statements
4. A personal financial statement – listing what the principals own & owe
5. Business bank statements (2-3 months)
Lending money is all about managing risk. To help bankers evaluate risk more completely they will typically test a loan request and accompanying financial data against the following criteria.
1. Character – Does the borrower exhibit character or integrity? Does the business and its owner have a good reputation in the community?
Does the borrower exhibit a good credit history? Does the business and its owner pay their creditors on time?
2. Capacity – Does the borrower exhibit the financial capacity to repay the loan requested? Is sufficient cash flow available to make the payments?
3. Capital – Does the borrower exhibit sufficient capital to support the loan requested? Is there sufficient cash for a down payment and for a cushion in case business gets slow.
4. Collateral – Can the borrower provide sufficient collateral to secure the debt? Are there assets such as real estate, equipment, A/R or inventory that can be pledged to the bank as security for the loan?
5. Conditions – Is the condition of the borrower, the borrower’s industry and the general economy favorable to the repayment of the loan? Are there aspects of the business, the industry or the economy that would negatively impact the ability to repay?

Loans for small businesses are available. Community banks are ready, willing and able to provide that much needed financing. But, now more than ever businesses must be able to provide the information and the documentation necessary for bankers to assess and mitigate the risks inherent in making loans. Being prepared before you apply is an important first step which will accelerate the process and increase your chances for an approval.