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
Monday, March 23, 2009
Monday, March 16, 2009
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.
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.
Monday, March 9, 2009
Will the economy ever recover?
Regardless of where interest rates are, what the value of your home is, how much money the government heaps on the problem or which “too big to fail” financial institution is bailed out next, attaining some level of stability is the key to halting the current downward spiral and getting us on the road to recovery. That is a certainty. What is currently uncertain and being debated daily is how we bring back that stability, how we promote public confidence, how we get banks lending and consumers spending. Is the current stimulus package the answer? Solving a credit crisis with massive amounts of additional debt seems counterintuitive, but there is no question something has to be done. Is nationalization of some banks the answer? Maybe. As the nation’s largest banks continue to seek and receive federal capital injections Uncle Sam is slowly becoming a majority shareholder. But, there are strings attached to government ownership. For instance, restrictions are being placed on the payment of dividends by those banks accepting TARP funds. Will that make it more difficult for those banks to attract and retain capital and will they ultimately be challenged to repay TARP? Is the creation of a “Bad Bank” or “Aggregator Bank” similar to the old Resolution Trust Corporation the solution for moving toxic assets off of bank’s balance sheets? This strategy, while expensive to tax payers, worked in the 1980’s with failed S & L’s. There are troubling differences today, though. The assets taken over from failed S&L’s were relatively easy to price and sell. The toxic assets affecting bank performance today are substantially different--countless types of credit derivatives—which are dizzyingly complex. What’s more, today the proposed agency would be taking over failed assets of existing banks rather than simply selling off the assets of failed institutions. A protracted negotiation process between the proposed agency and the banks whose troubled assets it is attempting to buy could lead to endless delays. Finally, are auto makers, investment bankers and mortgage lenders really too big to fail or is it time to endure the pain of an overall economic adjustment rather than masking the problems with massive debt that may have much larger, more long lasting effects on our economy a few years from now?
Given these issues and the uncertainty about what will work, attempting to predict exactly where the banking industry and the national economy are headed is impossible. Exacerbating the effort is the fact that besides all of the unanswered issues and questions in order to know where it is we are going, we really need to know where we are, and where the economy and the financial industry are changes almost daily. Obviously, then we need to find a point of stabilization, we need to identify the “bottom” of the market and apparently we aren’t there yet. And no one is speaking out to venture a guess about when we will be.
To the contrary, the closest we seem to get in terms of defining the end of the problems and the beginning of recovery are daily comments such as those offered by Newt Gingrich in his remarks recently at a breakfast with reporters and columnists organized by the Christian Science Monitor in which the former House Speaker suggested we are “going to go off a cliff”. “This is a much more profound problem than people think” said Mr. Gingrich. He went on to reference sources who predicted $4 trillion in bailouts before it’s all over and…another three to five years, at a minimum, of working our way through this”.
Whether a cliff or $4 trillion in bailouts is in our future remains to be seen. (It feels too many people that we leapt off the cliff months ago) The more important issue now is where is the bottom of this crisis? Clearly, creating confidence and stability is the key to finding the bottom and moving toward a recovery. Some analysts are clear about the importance of restoring faith in the system but very careful about predicting when it will happen. George Van Horn a senior analyst with IBIS World (a market research organization specializing in long range forecasting of industries and the business environment at large) was quoted in Chief Learning Officer Magazine saying, “Stability is the first issue…”. He went on to say “If the stimulus plan does help add stability, maybe you’ll see it by the second half of this year. [And] with stability will come confidence, and the economy will start to recover as we go through 2010”. As with most predictions today stability is the answer but when and how this will happen is filled with “if’s” and “maybe’s”. We will have to wait and see.
Stability, though, is the key and an industry that has continually contributed to that stability and holds the financial answers for most small businesses is community banking. Community banking has expanded even in this recessionary economy. Unfortunately, the negative headlines lump all banks together. Many of the troubled “banks” are actually not insured depository institutions, but rather Investment Banks, or Mortgage Banks. And those insured depository institutions that are failing comprise a small segment of the industry usually made up of “too big to fail” megabanks. What isn’t reported enough is that community banks make up 98% of all banking institutions, that these banks are locally owned and operated and that they are well capitalized. "Community banks are locally owned, and their assets are being put to use in the community in such products as loans to small business and consumer loans," explains Aleis Stokes, director of public relations for the Independent Community Bankers of America (ICBA). "They are competitive in rates.., understanding [of] the marketplace, and willing to support the local community in challenging times."
So, if you want more detailed information about the state of our economy and the prospects for and timing of a recovery stay tuned. But, if you are looking for a place to conduct your personal and business banking and for banking professionals who care more about relationships than simply accepting financial transactions look to community banks.
Given these issues and the uncertainty about what will work, attempting to predict exactly where the banking industry and the national economy are headed is impossible. Exacerbating the effort is the fact that besides all of the unanswered issues and questions in order to know where it is we are going, we really need to know where we are, and where the economy and the financial industry are changes almost daily. Obviously, then we need to find a point of stabilization, we need to identify the “bottom” of the market and apparently we aren’t there yet. And no one is speaking out to venture a guess about when we will be.
To the contrary, the closest we seem to get in terms of defining the end of the problems and the beginning of recovery are daily comments such as those offered by Newt Gingrich in his remarks recently at a breakfast with reporters and columnists organized by the Christian Science Monitor in which the former House Speaker suggested we are “going to go off a cliff”. “This is a much more profound problem than people think” said Mr. Gingrich. He went on to reference sources who predicted $4 trillion in bailouts before it’s all over and…another three to five years, at a minimum, of working our way through this”.
Whether a cliff or $4 trillion in bailouts is in our future remains to be seen. (It feels too many people that we leapt off the cliff months ago) The more important issue now is where is the bottom of this crisis? Clearly, creating confidence and stability is the key to finding the bottom and moving toward a recovery. Some analysts are clear about the importance of restoring faith in the system but very careful about predicting when it will happen. George Van Horn a senior analyst with IBIS World (a market research organization specializing in long range forecasting of industries and the business environment at large) was quoted in Chief Learning Officer Magazine saying, “Stability is the first issue…”. He went on to say “If the stimulus plan does help add stability, maybe you’ll see it by the second half of this year. [And] with stability will come confidence, and the economy will start to recover as we go through 2010”. As with most predictions today stability is the answer but when and how this will happen is filled with “if’s” and “maybe’s”. We will have to wait and see.
Stability, though, is the key and an industry that has continually contributed to that stability and holds the financial answers for most small businesses is community banking. Community banking has expanded even in this recessionary economy. Unfortunately, the negative headlines lump all banks together. Many of the troubled “banks” are actually not insured depository institutions, but rather Investment Banks, or Mortgage Banks. And those insured depository institutions that are failing comprise a small segment of the industry usually made up of “too big to fail” megabanks. What isn’t reported enough is that community banks make up 98% of all banking institutions, that these banks are locally owned and operated and that they are well capitalized. "Community banks are locally owned, and their assets are being put to use in the community in such products as loans to small business and consumer loans," explains Aleis Stokes, director of public relations for the Independent Community Bankers of America (ICBA). "They are competitive in rates.., understanding [of] the marketplace, and willing to support the local community in challenging times."
So, if you want more detailed information about the state of our economy and the prospects for and timing of a recovery stay tuned. But, if you are looking for a place to conduct your personal and business banking and for banking professionals who care more about relationships than simply accepting financial transactions look to community banks.
Wednesday, February 11, 2009
Banking During Turbulent Economic Times
Exclusive Interview with Dave Gill, President and CEO of MileStone Bank headquartered in Doylestown, Pa.
Introduction:
In 2007, David W. Gill (President and CEO) and Elijiah Gray (CFO) co-founded MileStone Bank in response to industry consolidation that resulted in larger, more impersonal financial institutions. They saw an unmet need in the market and had a vision to provide target client segments (including dental professionals) with a new kind of banking that combines the highest level of personalized service with the latest in cutting-edge banking technology. They assembled a hand-selected team of experienced, knowledgeable bankers along with exceptional products and the results have been rewarding for both the client and the organization.
The Doctor of Dentistry editor was curious about a new kind of banking during these turbulent economic times and conducted the following interview to learn more:
Doctor of Dentistry: The current economic environment poses a unique set of challenges within the financial industry. How is MileStone weathering the storm?
Dave Gill: We agree with a recent Business Week special report that cited “This may be the ideal time to start a bank…startups hold a key advantage: a clean slate…they can deal with customers instead of dealing with problems.” Many larger banks are overwhelmed with managing TARP (troubled asset recovery program) and the operational details of resulting mergers. MileStone Bank is able to focus on meeting the loan and deposit needs of clients with agility not bureaucracy and red tape. Our clients find it refreshing.
Doctor of Dentistry: What geographic markets does MileStone serve?
Dave Gill: Because of our business model and innovative delivery systems, we are not restricted to a specific geographic territory. We can offer clients “banking without boundaries”. In fact we have over 100 locations throughout Pennsylvania and bordering states. In essence, we provide a banker on your doorstep for personalized service when you need it; and, we supplement that with a branch on your desktop - Remote Control banking system. The system enables checks to be deposited electronically using a scanner and secure online banking. Clients love the convenience, are delighted with the financial benefits of having next-day access to deposited funds, and appreciate that the package is FREE.
Doctor of Dentistry: What qualifies MileStone to be specialists in the dental industry segment?
Dave Gill: We have been serving the dental industry for the past 20 years with everything from loans to start their practice or buy new equipment to the state of the art Remote Control banking technology. Understanding the unique needs of dental professionals, we have responded with services distinctively designed to help the office run more efficiently so doctors can build their practices more effectively.
Doctor of Dentistry: I can see that you offer benefits to the industry, what’s in it for you?
Dave Gill: It’s rewarding to meet the needs of our clients and receive their endorsement through referred business. And, our client focus pays high dividends…we are the fastest growing bank in suburban Philadelphia. MileStone Bank is well capitalized, and has a strong and healthy balance sheet. It’s especially fulfilling to see the successes of clients like Dr. Gary Nack recently voted 2008 Best of Bucks County in the dentistry category. We look forward to building relationships with dental professionals for years to come.
Dr. Gary Nack:
“Their service is the best and they will bend over backwards to make things work for you- they are cutting edge, tech savvy people. The check deposit machine is a flawless way of doing banking. I cannot say enough good things of their bank,” says Dr. Nack a dentist from Bucks County.
For more information about MileStone bank, call 866-672-2655 or go to www.milestonebank.com
Introduction:
In 2007, David W. Gill (President and CEO) and Elijiah Gray (CFO) co-founded MileStone Bank in response to industry consolidation that resulted in larger, more impersonal financial institutions. They saw an unmet need in the market and had a vision to provide target client segments (including dental professionals) with a new kind of banking that combines the highest level of personalized service with the latest in cutting-edge banking technology. They assembled a hand-selected team of experienced, knowledgeable bankers along with exceptional products and the results have been rewarding for both the client and the organization.
The Doctor of Dentistry editor was curious about a new kind of banking during these turbulent economic times and conducted the following interview to learn more:
Doctor of Dentistry: The current economic environment poses a unique set of challenges within the financial industry. How is MileStone weathering the storm?
Dave Gill: We agree with a recent Business Week special report that cited “This may be the ideal time to start a bank…startups hold a key advantage: a clean slate…they can deal with customers instead of dealing with problems.” Many larger banks are overwhelmed with managing TARP (troubled asset recovery program) and the operational details of resulting mergers. MileStone Bank is able to focus on meeting the loan and deposit needs of clients with agility not bureaucracy and red tape. Our clients find it refreshing.
Doctor of Dentistry: What geographic markets does MileStone serve?
Dave Gill: Because of our business model and innovative delivery systems, we are not restricted to a specific geographic territory. We can offer clients “banking without boundaries”. In fact we have over 100 locations throughout Pennsylvania and bordering states. In essence, we provide a banker on your doorstep for personalized service when you need it; and, we supplement that with a branch on your desktop - Remote Control banking system. The system enables checks to be deposited electronically using a scanner and secure online banking. Clients love the convenience, are delighted with the financial benefits of having next-day access to deposited funds, and appreciate that the package is FREE.
Doctor of Dentistry: What qualifies MileStone to be specialists in the dental industry segment?
Dave Gill: We have been serving the dental industry for the past 20 years with everything from loans to start their practice or buy new equipment to the state of the art Remote Control banking technology. Understanding the unique needs of dental professionals, we have responded with services distinctively designed to help the office run more efficiently so doctors can build their practices more effectively.
Doctor of Dentistry: I can see that you offer benefits to the industry, what’s in it for you?
Dave Gill: It’s rewarding to meet the needs of our clients and receive their endorsement through referred business. And, our client focus pays high dividends…we are the fastest growing bank in suburban Philadelphia. MileStone Bank is well capitalized, and has a strong and healthy balance sheet. It’s especially fulfilling to see the successes of clients like Dr. Gary Nack recently voted 2008 Best of Bucks County in the dentistry category. We look forward to building relationships with dental professionals for years to come.
Dr. Gary Nack:
“Their service is the best and they will bend over backwards to make things work for you- they are cutting edge, tech savvy people. The check deposit machine is a flawless way of doing banking. I cannot say enough good things of their bank,” says Dr. Nack a dentist from Bucks County.
For more information about MileStone bank, call 866-672-2655 or go to www.milestonebank.com
Wednesday, February 4, 2009
Financial Empowerment for Women
(Things I wish my mother had taught me about money)
Men & Women are different. Did you know:
•Women leave the work force for an average of 11.5 years, compared to 16 months for men?
•A woman who leaves the work force for only seven years early in her career may receive half the retirement benefits of her male counterpart?
•Women are still paid an average of 20% less than their male counterparts?
•Only 49% of women have savings and investments greater than the total amount they owe on any consumer debt?
•Women live longer than men — an average of seven years?
•50% of women over age 65 outlive their husbands by 15 years?
•Three in four women are single when they die?
•Women leave the work force for an average of 11.5 years, compared to 16 months for men?
•A woman who leaves the work force for only seven years early in her career may receive half the retirement benefits of her male counterpart?
•Women are still paid an average of 20% less than their male counterparts?
•Only 49% of women have savings and investments greater than the total amount they owe on any consumer debt?
•Women live longer than men — an average of seven years?
•50% of women over age 65 outlive their husbands by 15 years?
•Three in four women are single when they die?
Due to these statistics, women need to be more in control of their financial future. Women tend to make the following financial mistakes: 1) Women invest later in life and more conservatively than men. Since women live longer and usually outlive their husbands, women need to invest earlier in life and make it a priority. 2) Women participate less often in 401(k) programs than their male counterparts. Partipating in company's 401(k) programs or IRAs are tax deferred investments. If you are in the 28% tax bracket, one out of every four dollars you put into a 401(k) or IRA is a reduction in your taxes not in your net paycheck. 3) Women are more likely to invest in their children’s college education than in their own retirement. Investing in your children's education is good but only after you have maxed out what you can invest in your retirement. You or your child can get a loan for their education but you can not get a loan for your retirement. In addition, your retirement savings are not counted against you (or towards what you can pay for tuition) when colleges are figuring out your financial aid. However, money you have set aside for your children's education will be deducted from the amount of financial aid you will receive.
Things I Wish My Mom Taught Me About…. Managing My Cash
•Spend less than you earn. This seems like common sense but many people spend more than they earn. Women need to take an inventory of what income they have coming in per month and what their expenses are. While creating a budget is a good tool, most people don't follow them or even look at them once they are done. If you have trouble controlling money in just a few categories, such as clothing or entertainment, create and adhere to a detailed budget for just these categories.
•Pay yourself first. Have your retirement taken out of your paycheck before you do anything else. This forces you to save and not have that money available to spend
Things I Wish My Mom Taught Me About…. Managing My Cash
•Spend less than you earn. This seems like common sense but many people spend more than they earn. Women need to take an inventory of what income they have coming in per month and what their expenses are. While creating a budget is a good tool, most people don't follow them or even look at them once they are done. If you have trouble controlling money in just a few categories, such as clothing or entertainment, create and adhere to a detailed budget for just these categories.
•Pay yourself first. Have your retirement taken out of your paycheck before you do anything else. This forces you to save and not have that money available to spend
Things I Wish My Mom Taught Me About….Savings
•Create an emergency fund equal to 3 - 6 months pay. Prepare for unexpected illness, accident or becoming a victim of corporate downsizing. Keep funds liquid and easy to access.
• Teach your children to save. You can accomplish this with young children by taking their birthday or holiday money and putting it into a savings account. Show them how much they have a few times a year. If you child wants a toy that is too expensive, have them save up their money to purchase it. If you have teenagers, force them to save a percentage of their paycheck that can't be touched by them, but offer an incentive. For example, I will pay for $100 per month of your gas expense if you save 50% of your paycheck.
Things I Wish My Mom Taught Me About ….Retirement
•Don’t count on social security. Depending on how old you are, social security might not be available when you retire.
•Saving for retirement is similar to an exercise program. The more you put into it, the more you will get out, and regular investing is key.
•If your employer matches 401K investments, get the entire match. I am amazed at how many people don't put enough into their 401k to get the employer match. It is FREE money for retirement.
•Don’t cash out your 401K. Pretend that your hard-earned, 401K-money was never yours to begin with. Otherwise, you will have to pay taxes & penalties, and work forever.
Things I Wish My Mom Taught Me About ….Credit Scores
•Factors that affect your credit score: Delinquencies, accounts opened during the last year, balances on revolving credit that are near limits, tax liens, bankruptcies, recent credit inquiries, too few (or too many) revolving accounts.
•Pay your mortgage on time. Too many people when they are short of money pay other bills before their mortgage. You need a place to live, if you don't pay your mortgage the bank is going to take your home.
•Always pay bills on time. Late payments negatively effect your credit score.
You can get a free copy of your credit report at http://www.annualcreditreport.com/
Things I Wish My Mom Taught Me About ….investments
•Choose the right Financial Advisor. Ask people you trust for a referral to a good financial advisor. In your initial meeting ask how they are paid, some are fee-based, meaning you pay a flat fee for them to manage your money and some are commission based, they get a percentage of your portfolio (i.e. 1%) or they get a commission on each trade. You need to know how they get paid and feel comfortable with that. Trust your instincts, if you don't like the person, don't trust them with your money. A good financial planner should find out about your lifestyle, when you expect to retire, what you want to do when you retire, where you will live, etc.
•Join a Club. An investment club will teach you about stocks and bonds. Money Club is a FREE service from WIFE.org, a non-profit organization co-founded more than twenty years ago. Find out more at www. MoneyClubs.com.
Managing your finances can be scary so ask for help from people you trust. As Marie Curie says:
“Nothing in life is to be feared. It is only to be understood.”
This article was written by Ms. Elijiah Gray, CFO of MileStone Bank.
Subscribe to:
Posts (Atom)
