Andrew Rogerson's Blog, page 66

August 2013 guests on 105.5FM and Money 2.0 with Andrew Rogerson

Each Tuesday at 10.00am I have a weekly radio show on 105.5FM and it is called Money 2.0. My guests for August covered a diverse range of topics. The topics of my conversations with each guest include the following:

Mark Robinson is a Commercial Real Estate Agent in Los Angeles and specializes in leading a team that needs a large amount of lease space in the shortest time possible to get a film or entertainment industry project up and running. Mark has an impressive list of successes. Here are just a few. My conversation with Mark was around the need to put together a highly motivated and disciplined team and doing tremendous planning so once the lease space is identified and the project is ready to roll, everything gets done professionally and to the highest level. My conversation with Mark went for most of the show and I found it intriguing.
Steve Zeller is a partner in Zeller/Kern and their business is about advising on personal wealth management, investment and financial planning. What struck me about Steve and the approach of Zeller/Kern is that they do a lot of planning and understanding their client needs before making any recommendations. Their business model is not to accept commissions to sell products but purely charge for their time and expertise. One of my questions to Steve was about the industries or markets he could see being attractive over the next few years and he identified medical technology, the energy complex, alternative energy and manufacturing.

Chuck Ashman is the Founder and Executive Producer of Business Matchmaking. His company provides a service of helping small businesses sell to Federal, State and Local government agencies as well as large corporations. Using the relationships he’s developed with these companies over many years, he has a unique footprint to help small businesses know how best to present themselves to win business as well as help small businesses protect and grow their business. The majority of my conversation with Chuck was how a small business can and needs to protect themselves from Cyber-attacks including some of the tools they can use.
Paul Martin came out of retirement as a dairy farmer in Petaluma, CA to work for Go Biz. Go Biz is part of the Governor’s Office of Business and Economic Development for the State of California. As we are all aware, there is a large amount of criticism that the State of California is not small business friendly and Paul’s role is to work in the Permit Assistance department to remove roadblocks and allow small businesses to get things done. The State of California has a huge diversity of businesses with many and varied needs. It was intriguing to hear what’s being done to get business regulation reduced in California. If you have an issue Paul provides a phone number you can call to get help.
Michelle Elder is the owner and CEO of Elder Tax.  Michelle is a CPA with more than 30 years’ experience helping business owners with their accounting and tax return needs.  My conversation with Michelle talked about the key things she sees as a CPA that business owners can do and do better.  Michelle spoke about running a business without a plan is like going on a vacation without a map.  One of the services Michelle offers is to meet on a monthly basis with her clients and review the financial statements that have been put together, but more importantly, use that information not only to check the business is operating according to the plan but also what’s happening  moving forward.  The plan is therefore not only a business plan but also a financial plan/budget.  Not sure how to put all this together, give Michelle a call and she can help you.
Kevin Whelan is the President and CFO for the Beverly Group based in Granite Bay.  He works with Beverly McFarland who is the CEO.  Kevin’s professional focus is that of a Receiver while Beverly focuses as a Trustee.  As a Receiver, Kevin is brought into a business when two parties are in a dispute and their case is before the courts.  The judge will decide to appoint a third party or Receiver and their role is to continue the running of the business while the two parties in a dispute through the help of the court, come to an agreement about how to resolve the dispute.  As an example, a lender may be owed money by a borrower for a business and the loan payments have fallen behind.  The lender is looking for satisfaction from the courts but don’t want the business owner to damage the business and so the need for a receiver arises.  Kevin therefore plays a critical role as his job is to represent the judge and make decisions in the best interest of the business.  My conversation with Kevin was very interesting as it covered some of the problems he can experience, how he gets paid, how he will bring in different skill sets to protect the business and more.
Hal Johnson has been the CEO of eight different companies in the US and UK.  His primary focus has been building management teams and he’s about to release a new book called “The Game Changer” which is the reason I invited Hal onto the show.  Hal works for a local Sacramento company called Leadership One.  Leadership One specializes in helping a business transition from one management team to the next.  Often the transition can be for a family owned business that was run by the patriarch or matriarch of the family and now it’s time to hand it over to the next generation.  To make sure it’s all done successfully including the minimization of taxes, Leadership One leads and manages the process.  My conversation with Hal was therefore a little about Leadership One and also about “The Game Changer” which provides a detailed road map of how to successfully manage a business and continue its growth.  Hal’s suggestion is that too many companies manage from the top down.  If a company wants to grow and be successful, it needs to have the direct reports prepare a meeting agenda and deliver regularly be it weekly or every second week to their manager with what they see is working or not working.  The manager then uses this information to action the pieces they own, facilitate the pieces they want their direct report to manage and escalate to upper management the items that need their decision.  The book is well written and provides a clear and organized method to grow and help a business get stronger.

Each week a recording of the show is available to listen to on my website. If you would like to hear my conversation with my guest, simply click the following link and it will take you to the page on my website where the recording is available and ready to go – 105.5FM and Money 2.0 with Andrew Rogerson. You can also see some of the guests I have coming up so you can listen and join me on 105.5FM and Money 2.0 each Tuesday at 10.00am.

26 seller finance options when selling a business

Seller finance to sell a business is generally the least preferred option for a business owner when they are thinking of selling or exiting the ownership of their business. Some owners would sooner take a lower price in cash to take their risk ‘off the table’ than ‘roll the dice’ and hope the buyer of their business is able to service the loan payments. The third option is finding a bank or other third party lender but the current lending environment means many lenders have such high credit requirements that many borrowers are simply unable to qualify.

Whether we like it or not, some things in life don’t change and there is absolutely nothing we can do about it. These include retirement, health issues, family and marriage issues and simply burning out. They also include reasons as simple as ‘it’s time’ as a serial entrepreneur is ready to move to their next venture.



In addition to the above, the economy continues to heal but at a lack luster speed. The slow recovery means unemployment is drifting down, home prices are drifting up but the source of finance a lot of business buyers used historically to get into business which was pulling equity from their house is nowhere near from what it used to be.

If you therefore own a business and it’s time to sell, seller finance is going to be an important part of your selling strategy. For seller finance to work properly for you, you will still need to find the right buyer. If you can find the right buyer, here are 26 seller finance options that may be available to you; depending on your type of business.

Secured Notes
Unsecured Notes
Assume Seller Guaranteed Credit
Assume Capital Leases
Earn outs
Seller Consigns Inventory
Non-Compete Agreement
Life Insurance Agreement
Health Insurance Agreement
Notes on Capital Equipment
Additional Training Agreement
Employment Agreement
Severance Agreement
Closing Bonus
Real Estate Lease
Family Employment
Fee for Staying on Lease
Fee for Guaranteeing Lease
Royalties
Licenses
Commissions
Common Stock
Preferred Stock
Convertible Stock
Warrants
Signing Bonus

Some finance options will require more work putting together than others. This additional work means not only being clear between the seller and the buyer but also the right legal agreement so both parties are fully protected. Depending what State the business is located, the seller may wish to file liens to further enhance their ability to get paid.

One of the Golden Rules of selling and buying a business is disclose, disclose, disclose. If the seller enters into seller finance and the buyer finds out a critical issue after the deal closes then having the seller finance instrument cancelled or amended may be an option.

If you have questions about selling your business you are welcome to email me at info@rogersonbusinessservices.com or give me a call on 916 570-2674.

Marketing tips for small businesses using Constant Contact

Karen Rice is the Regional Director for Constant Contact in Northern California. As Regional Director, Karen travels around Northern California and talks with business owners about helping them with their marketing needs and in particular using Constant Contact.

In case you are not familiar with it, Constant Contact provides an online tool to help business owners build a list of customers that buy their product or service and then make proactive contact to their customers using email, events, social media marketing campaigns, surveys and more. I’ve been a Constant Contact customer for over 4 years and find it simple to use, very cost effective and their customer support next to none.

As a guest on my radio show on 105.5FM and Money 2.0 on April 02, 2013, Karen and I had a conversation about how business owners can use Constant Contact in their marketing. Some of the topics Karen and I spoke about include:

What can a business owner do to help differentiate their message with so many emails hitting their inbox every moment of the day?
What are some of the strategies small businesses should use when incorporating social media marketing?
Apart from email marketing and social media marketing, how else can it be used?

Karen’s answer to this question was Event Marketing and Karen then went into detail about the value of event marketing and how it’s an active tool she uses to reach potential Constant Contact customers in Northern California with the events she co-ordinates including her support team.

How does Constant Contact make event marketing easy?
What resources are available to small businesses and nonprofits looking to learn more about effective marketing?
Are there any case studies or examples of success?

My next question to Karen was “What advice can you offer small business owners seeking to build their business?” The answer from Karen went into the subject of Engagement Marketing and why she believes it is important for small businesses. As a result of her answer, Karen and I then spent time talking about Engagement Marketing and here’s some of the questions I had for her.

What is the three-step Engagement Marketing Cycle?
What tips can you provide small businesses to get involved in Engagement Marketing?
What are some tips you can share for generating social visibility and word-of-mouth?
What are some common obstacles from small business owners?
How can one over overcome those obstacles?
What are some useful metrics for evaluating an Engagement Marketing Program?
Do you have any specific example of successful engagement marketing in action?

If you would like to hear my conversation with Karen, you are welcome to listen by clicking on the following link – Karen Rice from Constant Contact. Karen and I spoke on air for about 40 minutes so there is lots of good tips and suggestions if you own a business and want to take your marketing to the next level.

How to choose between a C Corp, S Corp or LLC

How to choose between a C Corp, S Corp or LLC? Are you wrestling with the idea of creating a legal entity to protect your assets but not sure which one is best? The solution is to talk to your attorney and get proper legal advice and your CPA to get the right tax advise but here is some information to help focus your talking points.

As you work through your options, do not forget. You can avoid the costs, spending your time plus the initial and ongoing paperwork hassles by operating as a sole proprietor and buying insurance to manage some of your risks. However, if you would like to know your choices and differences between the three main legal entity options available to you, here is a quick summary and comparison to consider. This is not legal advice. Please get that from your attorney.

LLC
S Corp
C Corp


Ownership options
No restrictions including citizenship requirements
Must be resident and US Citizen
No restrictions including citizenship requirements




Maximum 100 members





If ownership formalities violated cannot hold an S Corp for a number of years



Formalities including paperwork and meetings
Few
Many
Many


Tax liability when winding up
Once
Once
Twice


Taxation
Not subject to double taxation
Not subject to double taxation
Subject to double taxation


Maintenance
Fewer formalities
Follow formalities or corporate veil can be pierced
Follow formalities or corporate veil can be pierced


Shares into a Trust
Easier than S Corp
LLC is easier



Unemployment taxes on income
None payable
Due and payable
Due and payable


Self employment taxes on profit
Yes
No



Self-employment tax on salary
Yes
Yes



Self-employment tax on dividends


No


Losses
Deductible
Deductible
Non deductible


Fringe Benefits
Taxable
Taxable
Non taxable


Income recognition
Cannot be delayed
Cannot be delayed
Can be delayed

Most business owners start as a Sole Proprietor or Partnership so they can test their business concept, see if they have the skill and interest to continue as an entrepreneur and/or save some of the expenses filing a legal entity. Once there is confidence the business has a future the owner(s) look at their legal entity options to create a layer of legal protection and be more tax efficient. As you can see from the above, there is “no one size fits all.” Each entity has subtle differences. These differences apply with each State in the US. To learn and then decide which entity is right for you, talk to your attorney and/or tax advisor.

If you would like a bit more information about different legal entity options, click this link as it may help you with Which legal structure is right for my business.

If you have questions about selling a business or buying a franchise, give me a call on 916 570-2674.

Why a growing business is more attractive to a business buyer

A common question I get from business owners that are ready to sell is simply “What are the chances of selling my business? My answer is simplistic as at the end of the day, different buyers look for different things. However, if there are two things present the business has a good chance of being attractive to buyers. The first is the cash flow and the second is potential.

Very few buyers are willing to pay for a business with no cash flow. If the business is losing money, especially in this economy, a buyer has many to choose from but more importantly, they are looking to buy a business that is making money so the business can support their life style, pay the rent, feed their family, pay the mortgage and have a money left over to service any business debt as well as some padding if things don’t go well when they take over.

The second component is potential. The buyer of a business wants to know that the business they are buying is in an industry that’s not slowing or declining. Would you have an interest to buy a shoe repair shop, a retail book store or an electronic component business that’s being quickly replaced by a new technology?



How do you generate a new source of cash flow or increase the potential of your business? Here are five suggestions that can build value for your business as quickly as possible so you can sell it if that is what you would like to do.

Diversify

The first suggestion is to diversify. A strong and attractive business to a buyer has multiple revenue streams and a variety of different customers not only demographically but also geographically. For example, if you have a retail business and generate sales from face to face selling, use your expertise to diversify your business online.

Diversifying also applies to the business owner. Make sure the business has key employees that can step up and keep the business going when the owner needs some downtime; be it planned or unplanned.

Create and measure a management team

Most small businesses are an owner operator. When the owner decides it is time to retire and sell the business their potential buyer pool is either a member of the family or the same version of themselves but about 20 years younger. If the owner of the business has an effective management team in place, not only can the owner delegate and get more time to themselves, when they sell the business they have a broader base of potential buyers as it now includes buyers that are investors who don’t want to own and work in the business but buy the business including its management team to complement their portfolio of businesses and bring a return on their investment.

Quality financial statements

The place I start when a business owner approaches me to sell their business is by doing a valuation. My reason for starting here is that the quality of the financial statements will either make or break any possible sale of the business or transaction. If the financial statements are not in good shape and it’s doubtful an experienced accountant or book-keeper can make them presentable there is little to no point in me trying to help the seller as buyers will not be interested and it reflects poorly on me as a broker to take a business to market that has a limited chance of selling unless the sale is purely for the hard assets of the business.

Understand the bottom line and cash flow

If the quality of the financial statements are important for a business so too is understanding the bottom line and equally the cash flow of the business. Each industry has its own methods of creating a set of financial statements. The methods for a retail store that buys and sells products are different to a manufacturer who buys and assembles raw and/or finished goods to a construction company that has high labor and material. What’s common to all these however, is the owner of the business having a quality set of financial statements that roll up to report the true cash flow of the business. Cash flow is the mother’s milk of a good business. It’s critical the owner understand their financial statement and the cash flow pressure of their business.

Grow the business

If cash flow is the mother’s milk of a good business so too is a business that’s growing. Almost without exception, the first thing a buyer wants to see is the last three or five years Profit and Loss statement of the business. With a glance at the top line and bottom line numbers, a buyer can see if the business is growing, static or declining. If the numbers are declining many buyers will simply move on. They have little interest to buy a business in decline as they know with a change of ownership there is a chance in the short term a business will lose customers. For a buyer to therefore try to time or indeed know the bottom has hit the bottom and is now growing is not something they are willing to do. If the business sales are static that can be OK if the owner can provide a reasonable explanation and equally explain what a buyer can do to “turn it around.”

Is the time right for you to sell your business or you would like more information. Give me a call on (916) 570-267 or send an email to info@rogersonbusinessservices.com

Business risk management with attorney Angela Schrimp

Business risk management with attorney Angela Schrimp is my conversation with her today. Angela’s area of law she enjoys practicing is in the field of business be it a contract dispute, employer/employee issue or related area of law. Angela is part of a practice with a long name and it’s called Damrell, Nelson, Schrimp, Pallios, Pacher & Silva.

As a guest on my radio show on 105.5FM and Money 2.0 on July 31, 2013, Angela and I had a conversation about how the owner of a business can manage business risks. At its simplest level, Angela identified that a business owner or those thinking of becoming a business owner need to manage two different types of risks.

The first is insurable risks and is the easier of the two to manage as there are insurance products available a business owner can buy to offset those risks. The different types of insurance include Workers Compensation Insurance, Business Insurance which covers a range of problems such as an accident in the business by either an employee or customer and theft.

Other risks Angela identified is a business risk and will generally expose the business owner if and when they sign a business contract, for example, signing a lease and buying products or services from a vendor. Other business risks including hiring employees as well as Federal, State and local tax obligations.

If you would like to hear my conversation with Angela, please click the following link Angela Schrimp and Robby Ricks. Angela was the first guest for the show and my conversation with her starts about 4 minutes and 30 seconds into the show.

Managing business risk and being a FastSigns franchisee

Angela Schrimp is an attorney that’s part of a practice with a long name and it’s called Damrell, Nelson, Schrimp, Pallios, Pacher & Silva. Angela’s area of law she enjoys practicing is in the area of business be it a contract dispute, employer/employee issue or related area of law.

As a guest on my radio show on 105.5FM and Money 2.0 on July 30, 2013, Angela and I had a conversation about how the owner of a business can manage business risks. At its simplest level, Angela identified that a business owner or those thinking of becoming a business need to manage two different types of risks. The first is insurable risks and is the easier of the two to manage as there are insurance products available a business owner can buy to offset those risks. The different types of insurance include Workers Compensation Insurance, Business Insurance which covers a range of problems such as an accident in the business by either an employee or customer and theft.

Other risks Angela identified is a business risk and will generally expose the business owner if and when they sign a business contract, for example, signing a lease and buying products or services from a vendor. Other business risks including hiring employees as well as Federal, State and local tax obligations.

Robby Ricks was also a guest on my show and he is the owner of a local FastSigns franchise. His store is located near the corner of Watt Ave and Fair Oaks Blvd at 624 Watt Avenue, Sacramento. Robby has been a franchise owner for 13 years and was attracted to the industry as he graduated as a Graphic Designer from college.

During my conversation with Robby he talks about the importance of signs and how they are the cornerstone of helping a business owner build a brand, how he uses technology to create the latest signs be they a digital sign that can be used to change information quickly and simply or vehicle wraps applied to a car that give it a high profile travelling around the city or outdoor signs, building signs and more.

If you would like to hear my conversation with Angela and Robby, you are welcome to listen by clicking on the following link – Angela Schrimp and Robby Ricks.

July 2013 guests on 105.5FM and Money 2.0 with Andrew Rogerson

Each Tuesday at 10.00am I have a radio show on 105.5FM and it is called Money 2.0. The current format of the show is to have two guests each talking about a topic in which they are an expert.

For me as the host of the show it is great fun as I not only get to meet interesting people, their attraction to be an entrepreneur and why, but also a chance to learn about a topic I may know a little about but now know more.

Each week the show producer, Diane Bartlett records it for me and sends me a link so I can archive a copy on my website. Here is the link to my website 105.5FM and Money 2.0 with Andrew Rogerson and you are welcome to go to it as you will hear the following guests on my show and my conversation with them.

Do you want to know more about business valuations, the different types and how these are put together? Fred Hall is a certified business appraiser and explains all of this and more.
Lisa Miller is the owner of a franchise called Lady Bug Pest Control. Lisa talks about putting how she put her franchise together and who would be a good franchisee.
Do you own a business and are worried about employment laws and what you need to do correctly? Rex Berry is a Sacramento attorney with Berry and Block and Rex talks with me about this topic and more.
Rick Shampaine is also an attorney but he’s a business startup guy based in Florida. He loves creating new businesses and then moving on to something else. Rick talks about his current business which is the Big Frog T-Shirt company and how it makes T-Shirts but so much more due to the different technology they use.
Ready to sell your business but not sure where to start? Dell Richards specializes in PR and came on the show in early June to talk about what she does. Dell liked it so much that she came back to interview me and talk to me about the steps I take when someone wants to sell their business.
Have you thought about franchising your business but not sure where to start? Mark Siebert is the CEO of iFranchise and explains the steps to take a business concept and set it up correctly to franchise.
Eric Anderton is the CEO of the ABC Group and is writing a book called the Courageous Entrepreneur. Eric talks about getting into business and the mind set a new business owner should bring to set themselves up for success.
Are you thinking of hiring a business coach? Linda Bigler spent five years with Brad Sugars and the Action Coach franchise and now runs her own coaching business. Linda talks about working with her clients and using her tool, the Business Health Checklist to make her clients better and more successful.
Angela Schrimp is an attorney I’ve known for 5+ years and used a number of times in business transactions I’ve worked. Angela came on the show to talk about risk or more specifically the difference between risks we can manage through insurance and non-insurable risks.
Robby Ricks is a franchisee with Fast Signs; a business that helps with marketing and visual communications with signs, banners, vehicle wraps and more. Robby employs some great marketing techniques to grow his business. Listen to our conversation about how he does it.

Each guest segment is about 25 minutes and so provides plenty of time for me to drill down into a topic and ask a lot of questions. Once again, all this information is free and available by simply going clicking the following link to my website 105.5FM and Money 2.0 with Andrew Rogerson. You can also see some of the guests I have coming up so you can listen and join me on 105.5FM and Money 2.0 each Tuesday at 10.00am.

How do I get the highest price when I sell my business?

How do I get the highest price when I sell my business?  Something I’ve always believed in from the start of owning my own business is that you always run your business as if it’s for sale.  It may sound corny, a bit like wishful thinking or simply just not practical but it worked for me when I bought my first business some 30 years ago.

The business I bought was a turnaround.  The owner of the business was absentee and that made it very attractive to me to buy and take my young family a 5 hour drive from where we were living and relocate.

What made it more attractive is that before buying the business I made a point of visiting the business and pretend to be a customer.  As a customer I asked the employee that gave me their customer service some basic questions as if I planned to make a purchase.  The answers the employee gave me were factually wrong not by a little bit but a lot.  I then made a second visit to get another employee and the result was the same.  Perhaps the employees did not care, there was no employee training or the owner did not know any better.  As I came to find out, it was a combination of all of these.



The good news for me was that I was able to buy the business and after 12 months double sales and make the business much more profitable.  Two years after buying the business I received a call from a broker to see if my business was for sale.  It was not something I expected to happen but when I gave the price I was willing to accept to sell the business and the buyer and seller did not seem alarmed, the price and terms were negotiated and eventually accepted.  The buyer naturally wanted to do their due diligence but as I ran the business as if it was always for sale, that was easy.  The financial records were in good shape and up to date, I’d written down some basic policies and procedures and the rest, as they say, is history.

So what should you have organized in case you get that once in a lifetime phone call or a visit to ask if your business is for sale?  The following is a pretty good checklist.  Do not try and do everything all at once but make a point of starting or you never will.  Add to this checklist anything that is unique to your business so the list is accurate, well rounded and easy to update.

Financial

Tax returns for the last 3 years
If a C Corporation, include the first 4 pages of 1120 tax return plus all supporting schedules and statements
If an S Corporation or LLC, include the first 4 pages of the 1120S or 106, all supporting schedules & Statements of Explanation.  Include Schedule K-1 for each shareholder.
If a Sole Proprietor, included Schedule C and supporting Statements of Explanation.
Profit & Loss statements and Balance sheets for current Year-To-Date.
Name and phone number and name of Accountant
Sales tax returns, Last 3 years Year – End Returns and Monthly Returns for current year. 

Equipment

List of Furniture, Fixtures and Equipment at original cost.
Copies of Equipment Leases (If applicable) 

Lease

Complete Copy of Lease (Including Landlord’s name and phone number) and Property Management Company (if applicable)
Copy of Lease Assignment (If applicable)
Copy of proposed new lease (If applicable.) 

Other information (As applicable)

Corporate, Partnership or Spouse Approval to sell the business
Copies of Notes to be Assumed by Buyer
Latest Health Department Report (If applicable)
Copy of Franchise Agreement, Franchise Application and UFOC (If applicable) 
Approximate value of inventory at cost to be purchased by buyer.  If inventory count was done by an outside inventory company, include the valuation report.  

Selling a business comes with no guarantees however, being organized and prepared increases the chances of success.

If you are thinking about selling your business and are not sure where to start, give me a call on (916) 570-2674 or send an email to info@rogersonbusinessservices.com and let me help you get moving in the right direction.

How to choose the right SBA lender

How to choose the right SBA lender. There is no question that finding a source of finance to buy a business right now is incredibly tough. Be it good or bad, the market for finance for business acquisitions centers around loans done through the Small Business Administration or SBA loan programs. A 7A loan is for the purchase of a business while a 504 Loan is the purchase of commercial real estate.

The SBA which is a government agency, underwrites a large percentage of the loan for the banks that offer small business loans. This guarantee is very attractive for the banks and to make sure they make quality loans a rigorous set of rules and audits make sure the loans are underwritten to a high standard.

If you are thinking of buying a business and you want to find the right SBA lender, here are some items to check to make sure you find one that works for your situation.

Does your bank write SBA loans?

The main form of small business lending right now is an SBA loan because the Federal Government through the Small Business Administration or SBA is underwriting a large portion of the loan. The two main loan types for a small business are 7A loans to buy a business and a 504 loan to buy commercial real estate. If the bank you are talking to doesn’t do SBA loans check them off your list and look for another bank.

Is your bank a PLP or CLP?

If the bank writes SBA loans the next question is are you a PLP or CLP? A PLP means part of the Preferred Lender Program and the highest loan approval rating a bank can receive from the SBA and shows it has a lot of loan experience. It also means the bank doesn’t need to send the loan document package to the SBA for processing and approval. This means faster loan process and approval time. A CLP or Certified Lenders Program means the bank is qualified to process SBA loans but they prepare the loan document package and send it to a Regional SBA office for review and approval.

How does your loan process work?

A bank may have rules for certain loans which may or may not allow final approval. For example, small community banks may not have the same constraints as a midsize or national bank with loan commitments. Most national and regional banks require authorization and have a frequency of when they meet and make a decision. Understand the bank process and if you find it too slow, look for another SBA lender.

How many SBA loans did you write last year?

Data is readily available on which banks issued SBA loans over quarterly and annual periods. Your bank can and should be able to tell you when you ask. If the number of loans they have approved isn’t high you have a sign of how hungry they are to write a loan.

Do you have an SBA loan specialist on your team?

Banks normally have a Business Development Officer or some similar title to be in the community to attract and process loan applications. Part of their role is to triage the loan applications including the details of the borrower, the quality of the asset they want to buy and other details that will provide a decision about whether they are interested in that particular loan. An initial decision should be able to be given fairly quickly as a quick no is much better than a slow maybe which will probably eventually be a no anyway.

Does your bank have a loan lending limit?

If your loan is to fund a business that may grow and grow quickly and will need additional finance to sustain your growth, ask the bank their lending limit on their loan sizes. If you need access to additional finance and have your loan maxed out with your lender you’ll have to waste time bringing a second bank up to speed and processing loans with two banks.

What industries were they?

Not all banks lend to every type of business in every type of industry. Some lenders like restaurants, gas stations or the construction industry. Most don’t. Your bank can give you a quick answer to this question so if the answer is that they don’t like your industry, look for one which does.

Do you need my credit score, credit report and other personal information?

The starting point for most loan applications is the credit score of the borrower and a personal financial statement which they collect on SBA form 912. I just worked with a borrower that had an issue on the form 912 and it took just over 6 months to get final loan approval. If your credit score, credit report or form 912 requires a negative answer to a question, deal with it up front as if you try to avoid it and it comes to light later the loan will highly unlikely be approved. This situation creates so much frustration with the amount of time it takes to resolve. Click this link to see a sample SBA personal history form 912.

What is your loan collateral policy?

An SBA loan is underwritten by Federal taxpayers. The SBA therefore wants the borrower to provide as much collateral as possible so the borrower has the highest incentive to work hard and service the loan. Understand how much you will have on the line and if you are comfortable with this risk.

What other lending relationships do you have?

The maximum amount of a SBA loan is $5 million. If you will need to borrow more money then ask your bank what other lenders they can connect you with such as Angel Investors, Venture Capitalists or other sources of mezzanine finance.

If you approve my loan do you require my daily banking?

Perhaps you have personal bank accounts with another bank and you enjoy using their services. Some SBA lenders want access to all your banking including your deposits. If you don’t want to move those accounts to your new SBA lender, ask so you know where you stand.

An SBA loan is generally only approved for borrowers with a credit score of at least 680, no criminal convictions, a good credit report, experience in the industry they want to buy a business or real estate.

If you are looking for an SBA loan and want help finding a lender, give me a call on (916) 570-2674 as I have a number of relationships with different SBA lenders both locally, regionally and nationally.