Paul Rodeno

The turbulence in our financial markets has created distraction among the larger national banks to provide credit to businesses. This “credit crunch” offers significant opportunity for small and midsized banks to choose the best loans, secure improved pricing spreads and acquire deposits.

The changing environment also affords genuine opportunity for local entrepreneurs building businesses and experiencing real growth. The microclimate within San Diego is fueled by a diverse set of organizations from high-tech to tourism. Our economic diversity will help San Diego businesses withstand market volatility.

Entrepreneurs looking to grow their companies despite today’s financial markets may be considering ways to attract capital, increase a credit line or bolster infrastructure. Business owners who follow a number of easy steps will increase the likelihood of obtaining bank funds from business-focused community banks like Security Business Bank.

Be Prepared

An important part of the loan application process is supplying a bank with a comprehensive personal financial statement including savings, 401K plans, real estate assets, life insurance policies and debt history. Entrepreneurs are often in a hurry to ramp up their businesses. As a result, incomplete information may be their biggest obstacle.

In terms of credit issues, applicants should disclose to whom they owe monies and how they’re repaying their debt. Banks investigate a potential borrower’s credit rating as part of the due diligence process so it’s to the entrepreneur’s advantage to be upfront about any challenges and address how they’ll avoid these issues in the future.

Providing the financial institution with complete information usually works to a company’s advantage. Assets such as a life insurance policy often signal to a bank that borrowed money is more likely to be repaid. This lowers the entrepreneur’s risk profile and increases the candidate’s chances of getting a loan.

Plan For The Future

From a lender’s perspective, another important issue and potential pitfall to getting a loan is succession management, which involves planning for a company’s future. An organization needs to figure out what will happen when and if the owner wishes to exit the business. Ultimately, a bank wants to lend money to companies with strong ownership, solid leadership and well-thought-out business strategies — including what the business will look like five or 10 years from now.

Tell A Compelling Story

Entrepreneurs should have an engaging narrative to share with a potential financing source. Ideally, the story will address the business owner’s background and track record as well as the company’s growth prospects and complete financial picture.

At Security Business Bank, we look for well-capitalized companies with solid sponsorship, strong management and a clear strategic direction. An entrepreneur who can articulate a compelling story will help the banking team understand the full potential of a business idea.

Be Realistic

Many entrepreneurs think the lending process is a negotiation. It is not. A loan amount is based on the level of financing a company qualifies for and how much money it actually needs.

What’s variable is the structure of the loan. For seasonal businesses, for example, we’ve created customized financing arrangements so that a credit line increases during the busiest selling season, or bulge period, and decreases in slower months. With this type of debt instrument, an organization is able to modify a financing structure to meet the needs of the individual business and its particular operation.

Maximize Your Network

When seeking possible financial partners, businesses may benefit by maximizing their networks. A referral from a shareholder, a current client, a CPA or other professional services firm gives a candidate credibility and helps to open the door to a potential funding source.

San Diego companies poised to succeed in today’s economy recognize their strengths and pursue those areas without being diverted by more risky avenues. Banks will respond well to entrepreneurs who are carrying out plans that mesh with their historical context.

It’s been our experience that amidst big change and a revised status quo, new opportunities are equally available for smart managers.

Paul Rodeno is president and CEO of Security Business Bank, the only business-focused community bank based Downtown.