Banking Issues for Small
B ki I f S ll
Businesses
Miten Bhatia
US Bank
APNBA Business District Association Conference – June, 2008 1

Presentation Outline
Small Business Deposit & Credit Products
Deposit
The Five C’s of credit
Risk factors
Building a strong partnership with your bank
APNBA Business District Association Conference – June, 2008 2

Small Business Deposit Products
p
Business & Commercial Checking Accounts,
g ,
Savings, Money Markets
Transaction & Cash Deposit Costs
Sweep Accounts & Treasury Mgt. Products
4 Unique Options
Security – who to pay & when
Earn More & Save
Automatic Processes – ACH
Streamline Processes
APNBA Business District Association Conference – June, 2008 3

Small Business Credit Products
Business Line of Credit
Working Capital Needs and Payroll
Business Loan
Capital Expenditures and Fixed Assets
Equipment Finance
Large Capital Expenditures & tax benefits under
Section 179
Business Reserve Lines & Credit Cards
Convenience & Airline Mileage Credit
APNBA Business District Association Conference – June, 2008 4

The Five C’s of Credit
Cs
Credit
Capacity
Capital
Collateral
Character
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Credit
Borrower’s history of repaying obligations as
orrower s
agreed
Relies primarily on the businesses and
p y
guarantor's personal credit histories
Future vs. Past
vs.
Banks are looking at FICO, delinquencies,
delinquencies,
judgments and liens
liens
APNBA Business District Association Conference – June, 2008 6

Capacity
Represents the debt repayment ability of the
prospective borrower
Assessed by reviewing financial statements
and tax returns
Capacity indicators
Net income a good i di t
N ti d indicator
Cash flow analysis the prime indicator
Banks are looking for more revenue coming
into the business than what is being borrowed
APNBA Business District Association Conference – June, 2008 7

Capital
Equity and working capital positions
Borrower’s investment in the business
Borrower’s risk compared to the bank’s risk
Banks are looking for liquidity
Money Market Accounts, CD’s & Other Securities
APNBA Business District Association Conference – June, 2008 8

Collateral
Quality and quantity of assets that could be
assigned in the event of financial difficulties
Banks are looking at age, condition and the
Loan to Value (LTV)
(
(LTV)
LTV = Requested Loan Amount / Value of the
q
asset. LTV is usually valued at 80% or 100%
100%
APNBA Business District Association Conference – June, 2008 9

Character
Strength of a business relationship and the
integrity of the customer
i i fh
Evaluated ith face-t -f
E l t d with f face-to face di
to- discussions,
i
through credit reports, and by referrals
Willingness of the management to repay
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Risk Factors
High Risk
Hi h Ri k Low Ri k
L Risk
Anything unsecured Secured loans
No prior banking
p g Conventional loans to
relationships established businesses
No business bureau reports Strong deposit balances
Excessive recent inquires Deep and satisfactory
business bureau report
Recent late payments and
current outstanding No recent inquires
Unsatisfied liens judgments
liens, Industries with low rates
and collections of default
Industries with high rates of Secured collateral such
default as CD’s
CD s
Hard to collect collaterals
Start-
Start-ups
APNBA Business District Association Conference – June, 2008 11

Building a strong partnership
with your b k
ith bank
Strong personal credit history
Strong business credit history
Time in business
Type of business
Prior/existing banking relationship
APNBA Business District Association Conference – June, 2008 12