Research the bank:
You wouldn’t go to a podiatrist if you had a sinus infection, and it’s just as wrong to seek financing from a bank that does not know the industry your business is in.
Research the bank to see if it has a history of lending to other companies in your industry, and to determine whether it understands family business in general.
Lenders look favorably on outside experience.
Next-generation members who have previously earned significant experience outside the family business have a fresh perspective and a more neutral approach when it comes to strategizing for the future once the transition is complete.
Lenders find well-rounded, experienced second-generation leadership very appealing.(23 December 2009 - Online article The Private Business Owner )
Despite the barrage of recession-related doom-and-gloom stories, financing is still available for family-owned businesses.
Many healthy banks are hungry to lend to the right clients.
Even in these trying times, business owners who do their homework can find a stable lender that understands their industry.
In today’s economy, obtaining financing involves more than just planning internally to make a presentation that appeals to a bank.
With so many financial institutions in crisis, it is very important for business owners to protect themselves through due diligence research to ensure they are partnering with a stable bank that fits.
Show your stability
Business owners should be aware that lenders will scrutinize the dynamic between the founder and the second-generation members.
Before providing financing, lenders will want to see how the senior generation has planned and prepared for the transition.
Banks want to know to what extent the founder will remain involved, if at all, once the roles have been turned over.
The nuance of that dynamic is a very important factor.
Strength in numbers
Family business owners who have assumed leadership roles in their trade associations admit that the workload can be heavy—but they say the payoff is well worth it.The Private Business Owner
An excellent example of a family business with a successful banking relationship is BC Rentals of Southern California, whose owners have been banking with Sunwest Bank for 13 years.
The partnership began in 1996 with Robert and Sally Carson’s first company, Breezer Construction Services.
Since then, Sunwest Bank has assisted the Carsons with financing for equipment, a commercial building and a working capital line of credit.
Breezer Construction was eventually sold and BC Rentals was formed for the purpose of renting arrow boards for use in directing traffic, along with message boards, cones, compressors and other equipment used in conjunction with highway safety and construction.
The Carsons and BC Rentals have maintained a strong relationship with Sunwest Bank, using debt to finance capital purchases when appropriate. Robert and Sally Carson operate the business as a team; Robert handles day-to-day business operations while Sally manages the office and administrative matters.
Don’t be afraid to go straight to the top.
Potential borrowers should always meet with the bank’s senior management.
Sitting down with the CEO or chief credit officer is important to ensure everyone is philosophically aligned. (06 September 2008 professional evaluation )
Generational Equity article
Does your family business have what lenders are looking for?
1. Does your company have a sustainable competitive advantage?
2. Does your company have a talented management team?
3. Are the family dynamics harmonious?
4. Does your company have a dependable cash flow?
5. Does your company have a solid underlying net worth, and are the primary owners willing to support the company’s credit request with a personal guarantee?
Looking back, looking ahead
The past 15 years have been marked by incredible economic, political and technological changes. What lessons can family business owners learn from this fascinating period in history?( 01 November 2009 Press article Generational Equity )
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Generational Equity, Generational Equity, professional evaluation