Finding Financing in Today’s Economy Courtney Lipscomb, Business Banking Officer SunTrust Bank Live Solid. Bank Solid.
Commercial Mortgages Lines of Credit Equity Lines of Credit Unsecured Lending? Equipment & Term Loans Church Lending SBA Mortgages & Lines Refi/Cash Out, New Purchase, Construction, Land Are you paying more for leasing? Establish ownership Tax Benefits Investment Property Loan Types & Revenue Streams
The Soft Skills • Why are you going into business? • What does your product or service seek to accomplish? • Where is your data? • First Impressions
Loan Package Components • Application & Personal Guaranty • Personal Financial Statement • Schedule of Business Debt • Min. Past 2 years Personal & Business Tax Returns • 2 months Bank Statements • 4506-T Form for SSN# & TIN# • Past 2 years Income Statement & Balance Sheet • Business Plan & Pro Forma Statements (start-ups) • Organizing Paperwork & Agreements • Operating Bank Account
Historically Speaking, Not Just Your Score • SBFE-Small Business Financial Exchange, managed by Equifax • Predicts the likelihood of a small business account incurring 90+ days severe delinquency, charge off, or bankruptcy in the next 12 months • Mid-High 500’s • FICO Beacon Score-Consumer Accounts • High 600’s • Payment History, regardless of Score
Understanding Underwriting Character • Banks only have credit reports to rely on to determine character. • How you’ve paid others is the only true gauge a bank has on how you’ll repay them. • Take appropriate steps to keep your credit in good standing. • The Truth- Banks can see your entire history. Paying on time is as important as your score.
Understanding Cash Flow • Banks are Cash Flow Lenders • Profit – To report or not to report? How informed is your CPA? • GDSC – Global Debt Service Coverage is one ratio banks use to determine cash flow • Global = Personal income & expense + Business income & expense See example on next slide
Understanding Cash Flow • GDSC = Annual Income / Annualized Debt $60,000 / $29,500 = 2.03 • This means for every $1.00 of debt, there is $2.03 to cover it. • Banks generally require a ratio of: • 1.25 (Start ups) • 1.35 -1.40 (Conventional) • 1.00 (SBA, Non Start Ups) • 1.00-1.10 (Churches)
Understanding Underwriting Capacity • Does the business have the revenue and cash flow to support both new and old debt? • Is there a secondary source of repayment? What is it & where is it?
Revenue Streams Cont. • ______ %_____ • ______ %_____ • ______ %_____ • =100% • Avg unit price x # sold= revenue per stream • Avg unit price x # sold= revenue per stream • Avg unit price x # sold= revenue per stream • _______________ • $ Total Revenue next year
Positive Cash Flow? • Do you have a partner, family member, angel investor to become a co-guarantor on the loan? • Have you used the savings calculators on www.bankrate.com? • Are you eligible for grants, etc? • How much stimulus money was awarded to your county? Have you tapped into those resources?
Understanding Underwriting The 4 C’s of Credit • Cash • Collateral • Character • Capacity • The Bank’s Litmus Test to understand your ability to repay the loan if the business can not
Understanding Underwritingcont. Cash • Do not expect the bank to finance 100% of your business. • Where is your 10-15% down payment? • Bank 50%,SBA 40%, You 10% • Only cash FLOW repays loans • Not Bank Accounts
Understanding Underwritingcont. Collateral • Banks rarely lend on an unsecured basis • Acceptable forms of collateral are: • Real Estate- Proof of Hazard Insurance • Accounts Receivable / Inventory • Machinery/Equipment-Vin #, Bill of Sale • CDs • Restrictions vary per bank & loan type regarding percentages they will finance (LTV)
Show Initiative & Get Your Loan • Educate yourself & get relevant experience • Get professional help in organizing, managing & running your business to minimize costs • Research lowest merchant service rates • Research low cost payroll services • Collect payment faster with ACH • Fraud Protection • Pay attention to your personal and business cash flow • Address any issues on credit report Upfront • Have up to date, accurate, and realistic documents
Show Initiative- Reduce Expenses; Increase Profit • Ability to collect Payment wherever, whenever? SunTrust Lowest Rate Guaranteed & Free Equipment! • SunTrust Full Service Payroll @ $35/month-Period! • Free accounts, wires (depending on industry), ability to transfer money from business to personal online • Free Fraud Inspector (some accounts) • Ability to Deposit Money from your Desk until 8:30 PM • Dedicated Business Banking Team
Things To Consider • High Risk, Ineligible Industry? • Real Estate Developer, Financier, Agriculture • Stimulus Package • SBA Loan Fees Waived! • Low Prime Rate • New SunTrust SBA Export Lending Available 3rd Quarter! • Is your Business sustainable in the new green economy? • What/ how will environmental regulations impact you?
Show Initiative! • Let’s Work Together & Show Yourself the Money!
Question & Answer Courtney Lipscomb SunTrust Business Banking 404-624-4254