How to look for and identify the signs that it’s time for a new banker

There are signs that a company should evaluate its banking relationship in the hopes of finding a better situation. Among them are businesses that are experiencing a lack of communication with their banking officer, lack of feedback and decision-making ability, and the frequent transition of banking officers. 

“Sometimes a company might have had a good relationship with its banker, one that enables the company to get things done, then the banker leaves for another opportunity,” says Kurt Kappa, chief lending officer at First Federal Lakewood. “If the company then finds itself struggling to work with the bank’s decision makers, they may want to  consider asking to work with another banker, or switching banks entirely.”

Companies benefit from a partner that is proactive rather than reactive. It’s not ideal if the only time a company hears from its banker is when the company reaches out with an issue. They’re not asking to meet with the company to better understand the state of the business, talk through ideas and generally helping to inform the company’s strategic direction. Instead, they’re waiting for a phone call or worse, too busy to recognize they haven’t touched base with the company in awhile.  

“If you call your banker to address a particular issue and don’t get a call back for a couple days, there may not be a strong relationship there,” he says.

Smart Business spoke with Kappa about how companies can evaluate their banking relationship and the signs it’s time to move on.

What questions should a company ask when evaluating its banking relationship?

The first aspect of the relationship to consider is whether the company likes and trusts the person they’re dealing with. Does the company believe the banker has the best interests of the company in mind with each decision that’s made? Does the banker fully understand the business, its competition and the current industry landscape? And does the banker advocate for the business at the bank? It’s important for a business to have the right banking partners on their side, especially when their expertise and advocacy are needed to help the company get through difficult times. 

Once a company has evaluated its banking relationship, what are the next steps?

One of the initial considerations should be to determine if the bank can still complement the company’s strategy. Is the business working with a banker who can contribute to the company’s strategic plans, someone who has the right experience and knowledge? This isn’t to say that a company should switch banks if the relationship isn’t living up to expectations. The issues could center on the person with whom the company is dealing, and one person doesn’t represent everyone in the bank. That’s why a good first step is to look within the bank to see if there’s someone else available who better fits the bill.

However, there’s also a chance that the company might have outgrown its current banking relationship. The bank just might not be able to offer the rates and amortization structure it needs, making relationships, at that moment, a secondary consideration. If that’s the case, then it’s time to move on. 

How should a company use what it learned to find a better relationship?

Once a company has done its evaluation and identified the problems, a good next step is to start asking friends and professional advisers such as CPAs and attorneys who they recommend. It’s likely they know who in the community does what well.

Some banks are large enough and provide ample services, others can provide the hands-on relationship a company might be looking for. Which the company ultimately chooses depends on what’s important to the business owner, as well as what the company needs at that stage in its life cycle. What’s needed at one point in time might not be what’s needed later. And while some banks can grow with a company, others can’t. That’s why companies should regularly evaluate their banking relationship.

Insights Banking & Finance is brought to you by First Federal Lakewood

How to efficiently manage your technology assets

In today’s environment, technology is everywhere — from tablets and smartphones to medical and manufacturing equipment. That’s created an imperative for companies to carefully track their endpoint devices to ensure they are updated with the most recent software. It necessitates working with an experienced partner that specializes in providing online asset management capabilities and facilitating a successful refresh strategy.

“Companies with many employees are managing a lot of endpoint devices that come in, go out and possibly change hands as frequently as each month,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “When software licenses and device warranties end, a company must quickly and efficiently retrieve and replace or update those devices and software applications. That process is made easier through the implementation of a tracking system.”

Smart Business spoke with Altman about how companies can manage their technology assets throughout their lifespan.

What should businesses take into account from the day hardware is bought or leased?

A good first step is to estimate, as accurately as possible, when that technology will be due for an upgrade — what is the useful life of that equipment and when will it need an upgrade? If, for example, a device is on a depreciation schedule of five years, but the actual useful life of it is only two, the company won’t be ready to replace the device because it’s on the books for another three years.

Also, consider the replacement process strategy. Have a plan to swap out the assets, which are proliferating exponentially — consider that, on average, each employee may have three active devices at one time. With so many devices to update and replace, it becomes easy for chaos to be created.

Given all of this, don’t underestimate the value of leasing technology assets to manage the obsolescence factor and avoid having too much capital tied up in equipment.

What are the possibilities for streamlining and establishing efficiencies?

Companies no longer maintain devices that originate from one manufacturer and are purchased at one time. Tracking them requires a platform that enables a company to keep an active catalog of all devices, who has them and where they are in their lifecycle to more easily identify problems with certain model numbers, so users can be called in to have those issues addressed. It also allows a company to incrementally replace devices that have aged-out of their useful life, rather than all at once.

While tracking hardware lifecycles is critical, staying on top of the software maintenance schedules of those assets is equally as important. Have a mechanism to track versions throughout the network to maintain the most recent security updates, the newest user experience and compatibility as people work together and share information.

Companies of any size with any number of company-owned devices should track their assets. While a company with 20 to 30 assets doesn’t need a robust platform, as the device count rises and organizations spread out through remote working arrangements and travel, the need for an advanced solution increases.

Generally, what should companies expect in terms of device lifecycle?

Obsolescence must be carefully estimated, but for a quick reference, keep in mind that smartphones have a useful life of two years, laptops up to four, desktop computers up to five, storage devices and servers will last for four years before needing an upgrade, mainframes can go five years, and network phones and switches can last as long as seven years. Of course, this is just a generalized guide. Companies should review their hardware to determine a more accurate sense of the replacement schedule.

The importance of monitoring and tracking devices and software can’t be overstated. There are cases in which a device is still active beyond its warranty or maintenance contract, which can create costs that are hidden within an organization. Think about where the technology is going to be, not where it is. Accurately depreciating devices can be a major cost saver both in terms of replacement and maintenance costs, and productivity.

Insights Banking & Finance is brought to you by Huntington Bank

How to ensure your family’s estate-planning wishes are carried out

When it comes to estate planning, high-net-worth individuals naturally think about their assets — physical capital such as real estate, financial wealth, etc. But there are other assets to consider as well.

“There are questions, when it comes to transferring wealth, that are tough to answer,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “They are questions focused on helping families get to the core issues surrounding their personal values and the legacy they wish to leave.”

Financial legacy is just one part of the equation. There are different capital structures families should consider, such as social, human and intellectual capital.

“The right wealth management team will ask questions designed to get high-net-worth individuals thinking about the role and purpose of wealth in their family and how it can be used to help them flourish.”

Smart Business spoke with Altman about legacy planning and what families should consider well ahead of a wealth transfer.

When should the conversation about legacy planning begin, and who should it include?

It’s really never too early to start the conversation around legacy planning. It’s a conversation between spouses and typically includes adult children. Those conversations are facilitated by a team of advisers — a wealth adviser, estate planning attorney, accountant — and a designated professional to quarterback the team to ensure whatever is decided gets accomplished.

The process tends to begin by talking about the financial plan, which should lead to an understanding and documentation of the family’s financial and nonfinancial goals — the latter being what the family hopes it can accomplish in later generations. That, then, leads to a discussion about transferring assets. This could include the charitable giving strategy, which requires the creation of a plan to fulfill those charitable goals.

Whatever is decided ultimately needs to be written out in a plan so that it can legally affect the family’s estate plan.

What do families tend to overlook when considering their legacy plan?

Families sometimes created a plan when their net worth was much lower than it is currently. Their situation has completely changed, but yet their plan has not. Typically that’s because the person has pushed off making changes because they’re busy and estate planning seems like a problem to deal with in the future. Working with a team can help address this because then someone can follow up — usually annually — to ensure the plan is still up to date.

It’s also important to ensure all the professional advisers on the team are on the same page. If they’re not collaborating, important aspects of the plan can be missed — tax savings, investment opportunities, transfer strategies that enable a family to avoid paying wealth transfer taxes.

Further, not coordinating the business succession plan with the estate plan can lead to significant problems down the road. It’s not enough to tell people involved with the business who will succeed the current ownership when the time comes. It has to be documented — who should take over, how the asset passes to family (if at all) — for it to be legally binding.

What should someone look for in a legacy planning team?

A good place to start when putting together the legacy planning team are trusted family members and friends, especially those who are similarly situated — a personal or professional referral is important.
All the members of the team should be technically competent and each should have the right credentials. For example, the wealth adviser should have a CFP designation, meaning the person is obligated to be objective and put the interests of the client ahead of his or her own.

It’s also important to relate to the people on the team. A warm rapport is significant because legacy planning happens over a long period of time. And over that time, private and personal discussions will be had on sensitive topics, so the interpersonal dynamics of the group are significant.

Legacy planning involves thinking beyond financial capital. It means considering the legacy the family wants to leave and all they want to be remembered for. That’s why starting early, and with the right team, is critically important to the plan’s success.

Insights Banking & Finance is brought to you by Huntington Bank

How banks can help businesses achieve their goals

Through smart planning and a little luck, there comes a time in a company’s life cycle when it has the chance to aggressively grow.

To pursue this growth, companies may look to add new and growing clients. They may add a production line to launch a new product or increase volume. Or they may acquire a business. Some companies may leverage the momentum to sell or transition the company to new owners. 

“When companies are firing on all cylinders — when market opportunities and sound, creative strategies align — it’s a great time to be more aggressive in their pursuit of growth,” says Mike Toth, president of Westfield Bank.

Smart Business spoke with Toth about how banks can help businesses achieve their growth goals. 

What supports do businesses need during periods of accelerated growth?

Companies looking to speed up their growth should spend time re-evaluating their client relationships and client makeup. It’s a good idea to look at the existing client base to ensure there is a higher percentage of growing businesses within their client portfolio. If they find they don’t have many clients that are growing, it’s highly recommended that the company seek out more clients that are in that mode. 

Many companies are leveraging their bank’s relationships with accounting firms, attorneys and other service professionals as they pursue acquisitions — something not a lot of business owners have dealt with — to perform valuations and other due diligence processes. 

Access to capital is another need, both short-term working capital and longer-term capital, to support fixed asset purchases and acquisitions that are critical to really take full advantage of a window of opportunity. 

What, generally, tends to slow down business growth?

One barrier is access to talent. Some companies can find themselves in a market in which highly qualified candidates are hard to find, which creates competition for truly talented people.

It can also be difficult for companies to grow when they are unable to get the funding needed to take critical next steps, such as servicing a large new client or upgrading equipment. Companies that can’t access capital can find themselves with missed opportunities. 

How are banks able to help businesses grow and overcome obstacles to growth? 

In order to address those impediments to growth, businesses are well-served when they network and build relationships with their bank and other service partners. Companies should leverage their banker to make introductions to potential partners and, maybe counterintuitively, their competitors. It’s not unheard of for competitors to collaborate on certain projects when it’s mutually beneficial. And banks can bridge that gap. 

Banks are also helping companies overcome obstacles in the market by providing capital and making independent insights — objective opinions that can give companies a new perspective on the market and their place in it. 

A company’s banker can work with owners or executives to help them more accurately predict and plan for future capital needs. They can also identify potential pitfalls by leveraging not only their past experience, but the wisdom of other clients who found themselves in similar situations. 

What are the best ways for businesses to create strong relationships with their banker?

Business owners can get the most out of their relationship with their banker by being transparent and communicating regularly. Business owners should be explicit about what they’re looking for from their banker. Some banks will host networking events, which are good places for business owners to make new connections. 

An accomplished banker will get to know a business, and through that knowledge provide customized solutions to overcome obstacles and support the company’s goals. Banks want to see their clients thrive, and will find ways to be supportive, whether that means help with idea generation, networking and building relationships, or finding creative ways to build value.

Insights Banking & Finance is brought to you by Westfield Bank

What to consider when buying a professional practice using seller financing

Buying a professional practice—medical, dental, veterinarian, law offices and accounting firms—can be a unique process, especially when the professionals who will succeed the current practice owners have high student debt and/or don’t have enough money for a down payment. In these cases, the seller will carry the bank loan and the buyer will make payments directly to the seller, which is called seller financing. The buyer pays the seller as agreed until the buyer is capable of holding the bank loan on their own.

The seller will sometimes set terms where the buyer must obtain financing other than seller financing after a set period of time, such as five years. That’s when a bank can step in and refinance the seller note, which essentially is the bank taking over the loan previously held by the owner.

Regardless of the financial strength of the buyer coming into the deal, after that person has demonstrated they can successfully run the business on their own through steady performance or growth for a period of time (typically around 24 months), then the bank will likely refinance the note. That’s one of the key reasons buyers need to connect with a bank early in the process.

Smart Business spoke with Karen Mullen, Vice President, Commercial Lending, First Federal Lakewood, about buying a practice and the role of seller financing in the process.

How is the value of a practice determined?

The practice is purchased based on an amount agreed upon by the buyer and seller and can be contingent on any number of variables. There are companies that specialize in practice valuations that apply their analysis to help the parties determine the price for the business.

Once a price is determined and the transaction is made, the purchase agreement is the legally binding document that gets taken to the bank.

When should the buyer of a practice get a bank involved?

The buyer should seek out a banking partner as early in the deal process as possible—the earlier the better—because through the banker, the buyer is enlisting their help to guide them through the process.

Ideally, the goal is to ultimately get a more traditional loan. Typically, if someone is selling a practice it’s because they want to get out, often completely, and don’t want to worry about whether they’ll receive payments each month for a practice they continue to own. So a banker can help set a timeline for the transition as well as the terms of or financial responsibilities around that transition.

All banks have different lending requirements. Some might want the seller to stay on as a consultant, some might not. So it’s good to get the bank involved at the beginning, even before the buyer starts paying the seller.

How important is it to properly value the business when refinancing through seller financing?

There’s a tendency by people who sell their practice to think their business is worth more than its actual value. That’s why business valuations are so important. They ensure buyers don’t start paying on a practice only to find out it’s worth far less than the purchase price. That’s also why the person buying the business should always request the tax returns of the practice they’re purchasing. It’s essential that a buyer see and review the financials before buying.

In addition to a banker getting involved early, when should other outside professionals get involved?

When purchasing a practice through seller financing, it’s important to have professional service providers on board early. That includes an attorney and CPA, as well as a banker, to outline the goals of the transaction prior to starting the process. Then, a timeline can be discussed as to when the buyer plans on taking over and when the previous owner will be completely out of the business.  Knowing the end goal and engaging early with service professionals, as well as a banker, will greatly increase the chances of a successful transaction.

Insights Banking & Finance is brought to you by First Federal Lakewood

How banks can help businesses achieve their goals

Through smart planning and a little luck, there comes a time in a company’s life cycle when it has the chance to aggressively grow. To pursue this growth, companies may look to add new and growing clients. They may add a production line to launch a new product or increase volume. Or they may acquire a business. Some companies may leverage the momentum to sell or transition the company to new owners.

“When companies are firing on all cylinders — when market opportunities and sound, creative strategies align — it’s a great time to be more aggressive in their pursuit of growth,” says Mike Toth, president of Westfield Bank.

Smart Business spoke with Toth about how banks can help businesses achieve their growth goals.

What supports do businesses need during periods of accelerated growth?

Companies looking to speed up their growth should spend time re-evaluating their client relationships and client makeup. It’s a good idea to look at the existing client base to ensure there is a higher percentage of growing businesses within their client portfolio. If they find they don’t have many clients that are growing, it’s highly recommended that the company seek out more clients that are in that mode.

Many companies are leveraging their bank’s relationships with accounting firms, attorneys and other service professionals as they pursue acquisitions — something not a lot of business owners have dealt with — to perform valuations and other due diligence processes.

Access to capital is another need, both short-term working capital and longer-term capital, to support fixed asset purchases and acquisitions that are critical to really take full advantage of a window of opportunity.

What, generally, tends to slow down business growth?

One barrier is access to talent. Some companies can find themselves in a market in which highly qualified candidates are hard to find, which creates competition for truly talented people.

It can also be difficult for companies to grow when they are unable to get the funding needed to take critical next steps, such as servicing a large new client or upgrading equipment. Companies that can’t access capital can find themselves with missed opportunities.

How are banks able to help businesses grow and overcome obstacles to growth?

In order to address those impediments to growth, businesses are well-served when they network and build relationships with their bank and other service partners. Companies should leverage their banker to make introductions to potential partners and, maybe counterintuitively, their competitors. It’s not unheard of for competitors to collaborate on certain projects when it’s mutually beneficial. And banks can bridge that gap.

Banks are also helping companies overcome obstacles in the market by providing capital and making independent insights — objective opinions that can give companies a new perspective on the market and their place in it.

A company’s banker can work with owners or executives to help them more accurately predict and plan for future capital needs. They can also identify potential pitfalls by leveraging not only their past experience, but the wisdom of other clients who found themselves in similar situations.

What are the best ways for businesses to create strong relationships with their banker?

Business owners can get the most out of their relationship with their banker by being transparent and communicating regularly. Business owners should be explicit about what they’re looking for from their banker. Some banks will host networking events, which are good places for business owners to make new connections.

An accomplished banker will get to know a business, and through that knowledge provide customized solutions to overcome obstacles and support the company’s goals. Banks want to see their clients thrive, and will find ways to be supportive, whether that means help with idea generation, networking and building relationships, or finding creative ways to build value.

Insights Banking & Finance is brought to you by Westfield Bank

Why mitigating cyber fraud should be a top priority in your company

Ransomware, malware and phishing attacks are the major types of attacks being used today, all of which are a means to facilitate payments fraud via check, wire, ACH and credit cards. These methods of entry seem to have one of two primary purposes. One is an account takeover, which is an attempt to gain access to an account. The other is business email compromise, in which targeted email accounts are compromised and the owner is impersonated by a fraudster who makes requests to move payments around, a tactic that’s become increasingly popular as a means of perpetrating payments fraud.

“Business email compromise has shown to have traction,” says Jim Altman, Middle Market Pennsylvania Regional Executive at Huntington Bank. “These emails legitimately look as if they’ve come from a manager, and employees naturally respond to the request. The result is that dollars are increasingly moving out of company accounts.”

Smart Business spoke with Altman about the cybersecurity threats that are affecting companies’ financial accounts, and how companies and their banks can mitigate those threats.

What steps have banks taken to protect their clients from fraudulent banking activity?

Banks have taken at least two primary approaches to combat fraudulent banking activity. Communication and education have been important first steps. Through this approach, banks are helping their clients consider the cybersecurity landscape. Tactics will continue to evolve, so it’s important to establish a dialogue so that business owners can better understand the impact cybercrimes can have on their companies, regardless of their size, industry or characteristics.

Products and offerings are being created to help mitigate fraud, products such as positive pay and cyber liability insurance. There are also strategies such as establishing multiple accounts, each of which is used for a specific purpose. That can help limit potential fraud and lead to faster identification of fraudulent payments if a transaction occurs that’s out of character for a specific account.

Banks can also validate transactions. When a request looks outside the norm, the bank will call the customer to verify that the transaction was legit prior to any money movement.

What can companies do to mitigate cyber fraud, especially financial fraud?

It’s important to stay informed about what’s happening in the area of cybersecurity and cyber threats because resiliency is a key part of business safety.

Educate employees on what to look for in terms of fraud — for instance, don’t click on links because of the threat of malware, don’t provide personal information to anyone through email and be empowered to validate any request to transfer funds.

Also, companies should evaluate their technology, making sure their networks and systems are up to date and aren’t vulnerable to attack.

From a payments perspective, think about internal processing and the controls that are in place to make sure money isn’t moving unexpectedly. Companies can institute dual verification of payments, two factor authentication and other steps to be more aware of what money is coming in and what’s going out.

Why is it important for companies to act now to protect themselves from cyber fraud?

Fraudsters are looking for the path of least resistance, so companies must be vigilant and don’t assume it’s an unlikely scenario. Payments fraud has been reported in all 50 states and in 150 countries. Not all of those attempts are successful, but it highlights the determination fraudsters have for finding a way in. It’s also an indication that fraud will not only continue to happen, but may happen more frequently.

While protecting against payments fraud might seem like just one more thing to do, preparation is less disruptive than a financial or data loss from a successful breach. That can be a major distraction as companies try to recover their losses and manage their reputational damage.

Cybercrime takes on lots of shapes and forms. Companies must believe that it could happen to them and be ready for it in order to minimize the chances of a successful attack.

Insights Banking & Finance is brought to you by Huntington Bank

Why it’s important to include your bank in year-end planning

As the end of the year approaches, businesses often start putting plans together for how they’ll approach next year’s market.

“Right about now is when people start planning,” says Kurt Kappa, chief lending officer at First Federal Lakewood.

He says it’s usually right around the months of September and October that companies start to focus in on budget planning, looking for areas of opportunity to expand their sales, and line up equipment purchases to either replace outdated equipment or expand into new areas of business.

“Companies, as they take into consideration all their possible moves in the coming year, should really get their bank involved. That way, whatever their plan, it can be properly funded,” he says.

Smart Business spoke with Kappa about what companies should consider as they set a strategy for how they’ll approach the year ahead.

What should companies review as they develop their strategy for the coming year?

A good place to start is by taking a look at areas where improvements either need to be made or can be made, as well as where growth opportunities exist and how the company will approach those. 

Companies should make sure their cash flow aligns with the capital needs of their expansion plans. If a strategic move runs the risk of draining the company’s cash flow, it could mean the company isn’t able to meet a bank’s lending standards or the cash-flow covenants in their loan documents. 

Banks have debt service coverage ratios set on the loans they make. If a company spends a dollar, it’s got to show the bank that it will make more than that on the return. If they can’t, they won’t get more money to expand or make capital purchases. That’s why it’s important to plan now so companies can have these conversations with their banker and make the necessary adjustments to get the financing they need.

How should year-end planning align with a company’s five-year strategic plan? 

Companies always need to be flexible. While it’s important to stick to a carefully crafted, long-term strategic plan, there will inevitably be things that change during the implementation of that plan, both positive and challenging.

For instance, a company could find itself faced with an attractive potential acquisition that it didn’t foresee, or there’s an opportunity to land a new, large customer. On the other side, a company might have a key piece of equipment break and need to replace it with a new piece that’s more expensive than the current model — something that falls outside of the company’s anticipated expenses.

Changes such as these require companies to adjust their financial plan. They’ll want to stick relatively close to their five-year strategic plan budget but allow for the flexibility to capitalize on opportunity and adjust to unforeseen setbacks. 

Who should be involved in the planning?

Planning the year ahead should involve the leadership team, as well as a trusted CPA. The company’s bank will play a significant role in a company’s plans going forward. Often, however, the bank has already set the financing guidelines and it’s the CPA who keeps the company in line with those guidelines.

How can a company’s bank help as they map out their strategy?

It’s good for everyone to understand what the bank’s financing requirements will be if the company looks to acquire. For instance, what will be the out-of-pocket obligation? What will be the debt-service ratios? And how will it all affect the banking relationship?

Have a conversation about the structure, and give considerable thought to whether the company can meet those goals. If not, a major move such as an acquisition might not be possible, or profitable, and the opportunity should be allowed to pass.

Now is the time for companies to start looking at their year-end forecast and compare that to their budget vs. the actual figures. They should project what they anticipate doing for the upcoming year and make adjustments so they can feel confident that the plan is achievable, focus on it and grow.

The whole team, including the banking partner, needs to be on the same page in order to achieve success.

Insights Banking & Finance is brought to you by First Federal Lakewood

Questions to ask your banker before applying for a loan

When a business is preparing to go to a bank for financing, there are often many questions. That’s why it’s important that a company feels comfortable with its banker.

“Just as it’s critical for a business to have a good relationship with its CPA and attorney, it is critical to have a business banker the company feels comfortable consulting with,” says Karen Mullen, vice president, Commercial Lending, First Federal Lakewood. “If that’s not the case, then the company may want to consider changing banks.”

Smart Business spoke with Mullen about the conversation companies should have with their banker ahead of applying for financing.

What information should companies have ready to start the discussion with their banker?

Banks always want to know how the financing will be used, so a company should prepare to talk about the project or capital investment ahead of the conversation.

A bank will likely want to see the company’s tax returns, its P&L and balance sheet. Depending on the size of the business, a bank might also ask for the business owner’s personal financial information.

What questions should companies ask their banker before applying for a loan?

Business owners should always review the loan terms, interest rates and fees, the payment penalties, approximate monthly payments, and the amount of down payment required. It’s also good to discuss the type of financing that would be best for the project, whether a loan or line of credit. Bankers can also help guide businesses through buy/lease decisions—when it makes more financial sense to lease equipment rather than buy it outright.

Why is it important for a banker to know a business’s future plans ahead of getting a loan?

It’s always helpful to a banker if he or she understands where the company is heading, because then he or she can help find the right financing to help reach that goal. A company’s banker should regularly ask about the company’s plans for the future, whether it’s three months or three years. That’s relationship-based thinking and helps ensure everyone is on the same page, which is advantageous to a business because it helps inform the banker’s decisions when it comes to products and advice. For instance, if a business owner is thinking about retiring in five years, buying a new building might not be the best move in that context.

How does having a conversation with a banker before applying for a loan ultimately help the company get the loan?

The more the banker knows about the company, the more comfortable they’re likely to feel with the company’s request and the smoother the transaction will be. While the client-facing banker in most cases is not underwriting the loan, they are communicating with the people who are making the lending decisions. When the underwriter has a question and the banker knows the answer, it makes the underwriter more comfortable making the decision.

When dealing with a local bank, the people making the decisions know the community and the assets, companies and people that are being discussed, which is extremely helpful when making a loan decision. Underwriters will likely be familiar with the track-record of a business—its successes in the community—and that informs the underwriting process. That’s typically not found in large banks where the people who make those decisions are often located out of state.

It’s important to have a trusted relationship with a banker, someone the business is comfortable asking for advice and suggestions about the best financial moves to make. Having a trusted banker means business owners can focus on what they’re passionate about, and know they have help with finding the financing to bring projects to life.

Insights Banking & Finance is brought to you by First Federal Lakewood

The definition of business longevity is based on ownership’s goals

Business longevity doesn’t necessarily mean working to ensure a company exists beyond first-generation ownership. Rather, the meaning of longevity depends on the goals of ownership.

“Sometimes a business was mainly created to provide wealth for the owner, so longevity could mean staying profitable long enough to realize a successful sale,” says Joseph Bilinovich, senior vice president and market team leader at Westfield Bank.

However, he says business owners do change their minds. 

“Owners sometimes realize the importance of the business to their employees and their employees’ families. Whatever the original goal, they sometimes end up taking personal responsibility to make the business successful so that it can continue to exist and provide for the people who work for them for years to come.”

Smart Business spoke with Bilinovich about defining longevity and how to achieve it. 

How do owners/founders determine what longevity means to them?

Longevity has a constantly evolving definition. A business could be created just to fill a need, for personal reasons such as to support a family, to fill a need in the market that isn’t being met, or it could just be a passion project — to start a business that makes the world a better place. 

For some owners, the business becomes part of their purpose. They can become passionate about helping and being there for their customers and often feel a responsibility to support the company’s employees and their families. The goal, then, becomes ensuring the business lasts as long as possible because they feel that others are depending on its success. 

What is the strategy behind longevity?

Successful business owners commit to their vision for the company and to their employees. A business can only last if there’s an investment in people. Then the vision needs to be communicated to those employees and a road map created with the mile markers to success clearly indicated. 

Longevity also means not growing too quickly. Controlled growth is preferred. Develop a steady stream of revenue and have a good customer base. It’s natural to want to keep growing, but that should be done through planning and establishing a manageable pace. 

What are the landmark stages of a business, and how do a company’s capital needs change through those stages?

The startup stage is the riskiest time for a business. Every decision is critical. At this stage, raising capital can be tough because the value of the business is based almost entirely on an idea and the owners’ experience. 

The growth stage is next. Here, owners are required to carefully manage the company’s bottom line. It takes lots of planning and forecasting, and a solid foundation in place on which to grow. It’s also when financing comes into play. Owners would be wise to tap into their banker for advice when it comes to planning and forecasting capital needs, something that’s critical during this phase. 

The next stage is expansion. That could mean expansion in terms of geography, products and services, production, or workforce. At this stage, having key people in place is very important. 

After expansion is the maturity stage where a company is either sold or passed on to the next generation. When this happens, a company can move into another growth phase, typically because the next generation of ownership is eager to expand the business. Here, banks can provide significant help in aligning a company’s capital needs with its goals. 

How can banks help owners achieve their business longevity goals?

A banker can offer an outside perspective on ways to grow, such as through a well-timed acquisition or an influx of working capital. From a financing and financial statement management perspective, bankers can get into the numbers and help owners put them into a bigger-picture context to better navigate growth and slowdown periods. 

Bankers are in a position to stand back, look at the business from the outside and offer a fresh perspective. They can help owners assemble and execute a step-by-step game plan to achieve their goals and bring success to any stage of business.

Insights Banking & Finance is brought to you by Westfield Bank