Area Bankers Give Their Best Advice on Business Owners’ Frequently Asked Questions
Question 1: What is your best advice for business owners seeking capital?
Know your financials well enough to discuss them with your banker, be ready to explain any changes in revenues and have cash reserves.
-Debi Enders, vice president, small-business banking, Commerce Bank
Have a well-thought-out business plan. It doesn’t have to be a 100-page presentation, but it should cover sources, uses, rational and how the lender or investor will be paid back or get a return on investment.
-Sandy McCandless, St. Louis regional president, Frontenac Bank
I would encourage entrepreneurs to think through their plan prior to the request. How will this investment help you grow? What obstacles do you anticipate may arise? How will this additional capital help you better achieve your goals? Most bankers really want to help finance the growth of their clients. Owners that take time to think through their plan will have the advantage when they need it.
-Brad Darnell, senior vice president, business banking region manager, Kansas City and St. Louis, U.S. Bank
My best advice for business owners seeking capital is to ensure you are requesting capital from the most appropriate source. Many lenders have areas of specific expertise. Evaluate your need thoroughly and articulate the request clearly, accurately, and concisely. The investor or lender should have specific experience in your industry. They should add value through learning about your business, proper loan structuring, and advice.
-Steve Silver, senior vice president, Royal Banks of Missouri
Question 2: What is the biggest mistake you see business owners making when it comes to finding capital?
Small businesses take out high-interest-rate loans that take a long period of time to pay off. They should talk to a trusted banker before taking out a loan. Also, sometimes they go to a bank and are declined a loan and do not take the time to understand why the loan was declined and what they could do differently to improve the situation.
-Enders
A business plan that does not incorporate good assumptions nor does it project best-case, worst-case and expected outcomes.
-McCandless
Not planning ahead and communicating future capital needs to their funding source.
-Silver
Question 3: When it comes to finding the right bank and banker, what is the first step in the process?
Have a face-to-face conversation with a banker that will take the time to listen to your unique story, and the banker should take the time to help the small-business owner position themselves for borrowing. Sometimes the company can make just a few small changes that will have a large impact on their borrowing capacity.
-Enders
When meeting/interviewing bankers, make sure they understand you and the business. Rate, terms, conditions are never the “first step” discussion. Rather, they should take an active interest in you and your business plans.
-McCandless
The first step is to find a bank and banker that specializes in supporting business owners. Business owners need a specialist that understands their challenges and opportunities. A professional banker will take the time to learn your unique history, strategies and issues before recommending any solutions. Business owners deserve a banker that will deliver honest, tailored advice!
-Darnell
Get recommendations from financial partners that understand your business ( lawyer, CPA, Insurance agent and real estate brokers).
-Silver
Question 4: From a banker’s point of view, what are the most common red flags for lenders when they look at a loan package or business plan?
The most common red flags are blank spaces. The personal financial statement is a key document for any business loan, and many business owners do not take the time to fill it out properly. This leads to more questions from the lender and prolongs the process, which no one wants. Another red flag is having major discrepancies between what you report to the government (tax returns) and your self-generated profit/loss and balance sheet.
-Enders
The most common red flags are poor quality financial statements, low credit scores, delinquent taxes, negative net worth and/or working capital, frequent overdrafts, and prior bankruptcy/forgiven debt.
-Silver
Submitted 8 years 329 days ago