Banks deliver more than money to small businesses

Scott Tumlin is assistant vice president of small-business banking for Commerce Bank, Springfield Region.

At some point in the life cycle of a small business, the owner may need a loan either to start the company or to help it grow. All banks can supply money. The real question is, what else can they give?

Be prepared

Selecting a financial partner is like starting any relationship: You both want to make the right choice. To get the relationship off on solid footing, it's important to understand the criteria bankers consider when determining who qualifies for a loan, and how to best structure a financing package.

First and foremost, they'll want to see your business plan, including:

your background;

a business summary;

industry background and demographics;

target audience information; and

financial data on employees, salaries and benefits, overhead and projections.

If you need a loan to finance growth of an existing business, bankers will want to see your company's financial statements and business projections.

They'll also want to see your passion.

Start up right

A young businesswoman recently came into our bank looking for money to finance the purchase of an existing tanning salon. Her passion and her drive to succeed were apparent, and she had done her homework. She had studied the competition and the market; she knew the opportunities and the challenges.

The first challenge was the $130,000 asking price for the salon. A two-hour review of her well-thought-out business plan helped us determine that the price was too high; we encouraged her to continue negotiating.

By the time negotiations were finished, the price was down to $35,000. An Express Loan from the U.S. Small Business Administration covered that, and provided her with immediate working capital.

Many banks handle SBA loans, and bankers who specialize in small-business financing can help you determine if an SBA loan is a good option for you. You can save time by working with a bank that is designated as a preferred SBA lender; these banks have the ability to act on behalf of the SBA.

With proper planning and collateral, other loan options also are available; an experienced small-business lender will work with you to structure the best financing package.

Consider your options

There are essentially three types of banks to choose from: community banks that serve your local geographic region; regional banks that are community-oriented but larger than community banks; and large money center banks, with branches throughout the country.

Money is the least of your worries as you consider which type can best serve you; all banks have money to loan. However, you should consider:

How do you feel about the banker sitting across from you?

Does the bank have experience in your industry?

What financial services do you need and does this bank offer all of them?

How you feel about the banker is essential; this is a relationship business. It's important to find a banker who understands your personality and industry, and will work with you to help the company succeed.

Banks may offer specialty areas, such as retail or medical banking. Small business is considered a specialty area; it pays to work with a bank that offers products and services specifically designed to meet your needs.

Grow with a plan

In the life cycle of a small business, growth is like eating cookies. One cookie is good. Two cookies are even better. But three cookies may give you a stomachache.

Stories abound about small companies that start out with five bright people, and quickly grow into 150-person ventures. It looks great on paper, or in the paper. The problem is, the five bright people who started the company keep moving further and further away from the work they know and love instead of designing computer programs, for example, they're suddenly handling human resources issues.

The infrastructure to support growth must be in place, or things will fall apart and the right banker will help you realize that. The right banker will ask tough questions about your plans for growth, cash flow and projections.

When you get right down to it, that concern and involvement is the bottom line.