Business Lending Basics Dave Esworthy October 15, 2015
About First United Bank & Trust A Local, Community Bank Headquartered in Oakland MD since 1900 $1.3 Billion in assets; $700 Million in assets under management in Trust & Investments Division 25 offices in Maryland and bordering West Virginia communities Deep commitment to each community we serve Responsive and attentive service through local decision making and dedicated relationship management Talented staff offering expert advice in banking and long term financial planning 11/19/2018
Tension within the industry Lending Environment Tension within the industry Regulatory pressure Financial statement scrutiny Need for loan growth Relatively low demand 4/22/2013
Start with Personal Finances Assess personal financial condition Personal credit AnnualCreditReport.com / 877-322-8228 Credit reports available from Experian Equifax Transunion Request all 3 annually OR Request one bureau at different times in the year Take Action Clean up public records Pay down revolving debt - credit cards (balance to available ratio) Minimize inquiries Examples 4/22/2013
Start with Personal Finances Personal financial statement Bank form Create your own Example Personal Tax returns 3 years 4/22/2013
Business plan (start-up & ongoing) Business Information Business plan (start-up & ongoing) Organizational structure Product Market Projections 3-5 years SCORE https://www.score.org/resources/business-plan-template-startup-business Financial statements & quality– 3 years Spreadsheet QuickBooks CPA Compiled CPA Reviewed CPA Audited Tax returns – 3 years 4/22/2013
Key factors Business Information Conditions Character Collateral Story (business plan) Plausible Credible Character Credit Collateral Capital Liquidity Skin in the game Capacity (cash flow) Example 4/22/2013
Underwriting Priorities Cash flow Net income + interest expense + depreciation/debt Officer salaries Secondary source of repayment Guarantors Collateral Credit history Balance Sheet Liquidity Account Receivables Aging Equity 4/22/2013
Line of credit (LOC) or term loan Loan Options Line of credit (LOC) or term loan Small Business Administration (SBA) Loan Partial guarantee by SBA Fees Great for start-ups Secured Cash/liquid investments Real estate Commercial Residence Equipment/Vehicle(s) Tenant improvements Receivables Unsecured Add co-borrower 4/22/2013
Relationship versus price Choosing a Lender Relationship versus price Advisor role vs. transaction Price – rate and fees Underwriting standards Other banking services Payments/transactions Cash management Fees Funds availability Service quality Convenience 4/22/2013
Questions/Discussion Dave Esworthy desworthy@mybank4.com 301-662-5023 mybank4.com