Monday, March 17, 2014

Lender Matters: Five Advantages from Working with an SBDC Advisor

We are starting a series of articles for lenders, as indicated by "Lender Matters".  If you are receiving this newsletter, you are likely aware of the services offered by the Small Business Development Center (SBDC).  We offer confidential, no-fee business advising services for small business owners in most industries from detailed financial analysis and preparing a loan package to marketing and personnel issues.

Working with an SBDC advisor can help better prepare your business customers in putting together a loan application, buying or selling a business or expanding an existing business.  We can also review start-up business plans and walk a business owner through cash flow projections.  It is our practice to always direct any banker referrals back to the source.

Here are five advantages for bankers and your business clients from working with a business advisor:

1.  Education.
Business advisors spend a lot of time educating business owners on the lending process, bank requirements and SBA loan programs.  Our goal is to prepare clients for any possible questions the loan officer may pose.  We also are aware of regional resources available that may assist clients such as classes, conferences and other events.

Ratio analysis sample
2.  Cash Flow Projections and Assumptions
Advisors may spend hours with a client fleshing out detailed assumptions and cash flow projections that they provide.  We work with the clients using a variety of tools and spreadsheets that show assumptions, 3 year cash flow, income statement, balance sheet and ratios.  

3.  Global Financial Analysis
In many cases, a business owner may not fully understand the balance sheet or ratios. Performing a global analysis can take a closer look at A/R, Inventory turns, and other key ratios that factor in to a loan proposal.  

4.  Preparation
Business advisors may spend hours with a client to thoroughly review a business plan, work together on assumptions and cash flow projections, and more to help them prepare to meet with their lender.  We provide a checklist of items they should start gathering such as a personal financial statement or tax returns and we also explain the various SBA and other loan programs.

5.  Objective Third Party Review
In some cases, your business customers are not ready or prepared to apply for a loan.  SBDC advisors work with clients to assess business readiness, educate them on the loan process and requirements and work with them to present a well structured and complete loan package that fits with a bank's criteria.  

It is a win-win for advisors, bankers and most importantly, the business owner.  We all want to see our clients succeed, grow and get their loans paid off so they can grow (and borrow) some more!