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good afternoon welcome to today's vetnet entrepreneurship track presentation titled small business bank loans a baking professionals informational presentation my name is Mike Shanin I'm the program manager for bet net here at the Institute for veterans and military families located on the campus of Syracuse University before we get started a few housekeeping notes during today's presentation if you're participating live and would like to ask a question please feel free to speak up or you can type it in the comment box out to the right this can be opened up by hovering over the left side of your screen and clicking on the chat function for those of you watching live on YouTube please type the question underneath this live stream that will make sure that it is relayed and finally as always you're able to type your question out in the Google+ event page I will make sure that is relayed as well I'm now like to welcome Jonathan Sam Garden business banking professional from MIT bank here in Syracuse New York I'll turn things over to John where he will give a quick introduction of himself and then we'll get into the presentation so Jonathan over to you excellent thank you Mike I appreciate it my name is Jonathan san garden I work for M&T Bank a large commercial bank headquartered in Buffalo located in the Northeast my office is in the Syracuse location I work with small business owners all day every day and various stages of business a life cycle so I work with a tremendous amount of people in the startup phase mature companies people transitioning out but today I'm here to talk about small business loans to primarily startups or recently formed companies and answer any questions anyone might have that's my contact information as well as my title here at the bank but if we go to the next slide I really like this be as interactive as possible and I will certainly talk to you about what a bank is going to look for in the form of when we expect to get a loan package what we want to see in that some details around that and and really dive into the five Cs of credit so when we look to explore into into a new loan what we're going to look for from an underwriting standpoint so like I mentioned before we work with companies in you know every industry every lifecycle but primarily we're going to look at everything in the world of startups today so when I speak to any of the programs or C's of credit it's all going to be from a perspective of a start-up or people looking to get a relatively young company off the ground you can go ahead and next slide there Jim so I because I work for MIT which is a large commercial bank we represent traditional commercial senior debt so when we look at any type of lending we are a historical cash flow lender what that means is we're going to look at the last two to three years of an existing business and try and determine what the future is going to look like because the past is the thing that is most indicative of what's going to happen in the future when we have a start-up situation we have no history or a very limited history so obviously when I can be able to basing decisions on what that company has done historically because it hasn't existed five Cs of credit we're going to go through each of them and significantly more details so if we hit the next slide we're going to start off with character character for the most part when we look at a startup small business especially if there's only one principal or a few it's going to boil down to credit score so the individual that is owning and operating this business is the lifeblood is the only thing that's going to probably drive the thing going forward and in a small business startup situation we have to figure out what the past is looked like for that individual on a personal side since we don't have a much of a credit history on a business side so what that'll boil down to frequently is credit score individuals have handled the credit that they have had in their personal life in the form of mortgages credit cards student loans whatever that may be if we hit the next slide capacity or in other words cash flow at the end of the day after you've paid everything you need to pay what is left over how much money is that bottom line showing because when we try and figure out what a company can reasonably afford to pay us back we're going to look at your cash flow after you're done paying back you know paying your employees paying your suppliers paying for your inventory your rent your utilities at the end of it all what's there that is the free cash flow that is available for us to be paid back on our loans if we go to the next slide capital so capital is a very broad term but what it bakes down to is how is the company financed where does the money come from to get this company off the ground and it's the combination of equity and debt equity is the money that an owner is going to put into the business to get it off the ground so this is personal money that's coming from a savings account perhaps an IRA or you're borrowing money from an old 401k that you may have had is is the equity portion of that so it's the skin in the game so to speak the debt portion of that is is this is everything else so it's the bank loans you're going to have but because we're a traditional commercial bank and startups are difficult because we don't have a history to base it on a bank isn't necessarily always the best place or the first place to start if you need money because we're not necessarily the loosest we're not necessarily the person that is going to dive in and take a risk on a business opportunity so a lot of times people will start their businesses with honest and personal credit cards home equity loans mortgages on residences that they currently own loans from friends and family those are much more traditional avenues for people to get money to get a business off the ground so maybe if you get a couple years of track record before you go into a traditional commercial bank setting so when we look at capital we want to look at how much cash how much of your net worth and personal wherewithal is getting into the business before you come to us so we would want people to put their own money into their business to start it up well before our money comes in so we always need owners to put money in to establish some sort of owner's equity next election conditions really broad probably not really going to make much of a difference in in small business lending but general economic macro issues if you wanted to start a speculative real estate building company in Florida there's going to be macro issues that are working against you but in general not something that is going to be much of a headwind for us in this conversation next slide and fitzy collateral so as I mentioned before cash flow is the most important we want your business to function and operate and to run so it generates enough cash at the end of the day to pay us back when a bank lends money we want to lend you we want to lend you money we want to get our money back in a little bit of interest and that's about it when we get into a risky situation which startups are because there's no track record we would frequently look for some sort of collateral in addition to the business being able to pay us back on its own because it mitigates our risk it makes us a little bit more comfortable that if the business can't pay us back if those projections don't come through if those customers that we really thought would sign on if they don't and you can't pay us back how else are we going to get our money we need some sort of secondary repayment source so frequently that's going to be a personal residence once again any sort of personal assets that a small business owner may have accumulated throughout their life we can also look to mitigate our risk through SBA guarantees which we're going to get into quite a bit or if you are looking to use the loan or a commercial loan to buy equipment and real estate then those things would obviously be our collateral as well personal guarantees are always going to be a must so that means that if you get a loan from a bank you're going to be personally guaranteeing and so if that business doesn't have the ability to pay us back we're going to come to you personally and say you know mr. business owner anything that you personally own we would like you to liquidate or utilize for the purpose of making us whole but we can talk about that in more depth later next slide so what do we want to see what does a bank want to see when you bring when you when you raised your hand and say I'm looking for a small business loan we're going to want to see a pretty comprehensive robust well put together business plan last couple years of tax returns understanding that the business probably doesn't exist yet so those are only going to be personal tax returns we're going to be very interested in what your personal financial statement looks like because once again if we're looking at a start-up situation and there is not a track record or anything that we can base it on repayment wise we're going to look at your personal where with on your personal net worth to be able to make us comfortable if if we wouldn't otherwise be and regardless of the situation whether we have great collateral or we can utilize an SBA guarantee or any net extent we're always going to need at least 10% of that project cost in in equity from the owner so what that means is if you want to start a a landscaping business and you want $50,000 for equipment then we would expect the owner to put 5,000 of their own money into the project so instead of looking for us to finance 1% of it we would only be comfortable with at most 90% of that so we would want the owner to get some portion of their own cash their own skin in the game before our money gets into the deal 10 percents always the minimum and depending on the industry and the project that can certainly go up because we require those dollars in which is why I had mentioned earlier a bank isn't necessarily to get a small business loan a commercial loan isn't always the first place to start because not everybody can commit to that the other thing i want to say is when you put your business plan together to frequently small business owners start with capital they start by thinking I need money how am I going to get it I would strongly recommend that you end with capital meaning really flesh out an idea make sure that what you want to do is feasible there are clients that would sign up for your service or your product there's a market for it that there are reasons why you would be successful and that you can justify those before you come to us because too frequently people will say I need money not really have a fully processed fully comprehensive business plan business idea to present to us and it's it doesn't necessarily work out and it's not really for for the best next legend hey John if I could just interject that's an excellent point in regards to the feasibility analysis of of your business we here at the Institute have a feasibility tool that we will be including as part of the launch of our business resource library which is on track looks like beginning of next week which would be the let's see Monday the 9th or 10th so I'll make sure that I post a link to that when it becomes available out on this presentation link and feel free to take a look at that again it's about 10 or 12 questions long but it really does kind of hammer through those types of questions to do because just just because you may think an idea is you know is a great idea and everyone's going to want it that's not always necessarily the case I'm sure John's come across that so you really need to look at your business idea look at your business in a realistic light and this tool will help you to do that and it doesn't necessarily mean you need to trash your idea you just may need to retool aspects of it to make it a little bit more feasible and realistic not only to attain capital but also to kind of really grow that customer base so I'll go back to you John absolutely no that's great that's a great tool I appreciate that looking at the next slide previously I said what we're looking for is a really comprehensive well put-together thought up is this plan that's very easy for me to say in one sentence but you know what the heck does that look like how do I put it together and what am I looking for in that that could be a whole nother webinar because it's a pretty comprehensive what we're looking for but that being said depending on what you're trying to do you don't necessarily have to reinvent the wheel if you want to start a landscaping snow plowing company that is a very fine reasonable feasible thing and that is not a complicated concept that you have to convey to a bank but that we still need a business plan though because we want to make sure that you have gone through the thought process and the due diligence of actually going out identifying where your potential clients would be understanding what the price point in which you would charge them and at what price point do you need to charge in order to to make enough money to service the debt that you're looking to borrow so we knew need those bits of information completed and we certainly we certainly understand how a snow plowing and landscaping business would work in this example however we need to make sure that you have gone through those steps and through the due diligence to really fully understand what it takes to run your business and what it means to be able to servus this debt so it's it's an exercise almost an educational exercise for the applicant as much as it is a comforting thing from the bank to truly understand what your business is but kind of boiling down a little bit so what do we want to see in a business plan I make a couple references at the bottom here as places that you can go for further assistance because I certainly can't get you know overly comprehensive in just uh you know just half an hour but we want to look at you know tell us all about your business what is it why do you want to start it who are you why do you think that you can make this successful who your clients are going to be need to do some marketing need to understand the strengths the weaknesses the opportunities and the threats of your business you want to your SWOT analysis and we would need three years of financial projections this is huge this is not just a commercial bank saying we'd like this this is an SBA requirement that says in order for us to utilize an SBA guarantee which we're going to talk about a lot in a second we need three years of financial projections the projections are not necessarily easiest things put together if you've never done it so I would strongly recommend utilizing the small business development centers which are located all over the country it's a free service you can utilize an accounting firm they're probably going to charge you you can actually utilize local SBA offices there's a variety of ways for you to do that but we need three years of projections so we can get comfortable we can point at what we think the future is going to look like again because we have no track record and it also is a great exercise in understanding for the applicant to make sure that they fully understand the impact of every aspect every portion of that small business let's see here next slide in John I just put out for those of you who are watching live in the comment box I put up the website where you can find your local SBA or SBDC office but again if you just go in Google spdc or SBA office locator that should be able to come up you can find one in your in your city or your region I'll tell the folks at the SBDC here in syracuse and some of the other regions that we work in are absolutely outstanding they will help you they will not write your plan but they will help you put everything into it that a bank wants to see because that is who they're preparing it for so they'll work with you to get your your income projections and cash flow projections and the balance sheet is going to look like and they're going to put it in the format that we need to see it so they're invaluable i
's a free service I implore everyone to take advantage of it so the SBA is a huge component to lending to startup businesses so the SBA is a subsidiary that works directly with banks the SBA does not initiate loans directly to clients they work with the lender to provide a guarantee on the loan that we extend to people to make banks more comfortable in a situation that we otherwise wouldn't be so if we have someone that's a startup and again with no track record we have nothing to base it on but if we feel that we can get close enough we can get almost there the SBA guarantee is going to guarantee us that if this loan does go bad a certain percentage of that is going to get paid back to the bank so that provides some level of comfort some level of collateral almost to the bank so that we can give those dollars out to small business owners or people without track records now obviously because this is tailored towards towards vets the Patriot Express loan program is a tremendous program that's offered within the SBA that allows banks to get up to an 85 percent guarantee to make banks that much more comfortable for the most part as a lender as a borrower as a small-business borrower you don't need to know a tremendous amount of detail about that you don't need to be an expert on the program certainly because hopefully your lender or your banker will be and they can walk you through those steps loans through this Patriot program or up to $500,000 they can finance really any portion of a small business we would expect to see rates in the five and F six percent range and in order to utilize an SBA guarantee there's an upfront fee that is paid by the borrower and it goes directly to the SBA so that doesn't go to the bank that fee is based on the dollar amount of a loan but it's somewhere between two and three percent of that guaranteed amount so for example if you borrowed $100,000 under this program 85% of they gets guaranteed so the fee is going to be somewhere between two and twenty five hundred dollars like we talked about earlier we're going to look for the business owner to get ten percent of the project costs into the deal in the form of equity SBA fees can be rolled into the closing of that loans so you don't necessarily have to come up with that out of pocket but just understand that those fees exists and really when we look to utilize an SBA guarantee it is not a it's not the cheapest way to go by any means and there's a lot of paperwork and there's some hoops to jump through and things like that but at the end of the day it may be the only way that we can get you the money and it might be slightly more expensive than if we you didn't use it but ultimately if it's the only evident we have then that's what we take advantage of also a point of clarification here banks approve or decline loans the SBA does not and just because the SBA guarantees are available to you does not mean that you're automatically approved like I was referring to earlier were commercial bank we operate in a pretty small box we're very conservative if your business doesn't fit in there maybe we can utilize some sort of SBA guarantee to get us comfortable but if that's not accompanied by a really strong business plan strong personal credit some equity going in on behalf of the owner we're not going to be able to get comfortable the deal we're not going to be able to approve it regardless of of any type of SBA guarantees that might be available next slide Jim so what to expect you know once you have the full package together and once we get everything we need the credit portion of it is pretty quick pretty easy so once we have the tax returns in the business plan and we fully understand everything we have everything answered and your personal financial statement all that we're going to send it to our underwriting team and they're going to make a decision pretty quick honestly two to five days so once someone looks at it there's going to be a quick decision and that underwriter is going to come back with one of three answers no we can't do it yes we can do it as applied for or yes we can do it but we need all these other conditions to be met as a small business owner that is looking to get a startup or your own company off the ground more likely than not you would receive an answer of yes we can do it but we need all these conditions met so what that means is yeah we'd be willing to this loan but we're going to want an SBA guarantee on it or we're going to want to take the person's home as collateral or we're going to want to take the cash value someone's life insurance this collateral so the other conditions or strings attached to that when that occurs we would then work with the borrower to get all of the necessary paperwork and SBA documentation and any other things that are needed to get those conditions met so you don't need to worry about finding going out and finding SB applications or anything that extent your banker lender should be able to walk you through that process anything once you get that approval that once we get started with the SBA part it could take a week it could take three weeks it could take a month it depends on a lot of factors and I guess the the factor depends on most is how quickly the borrower gets us everything back because once we get the credit approval and we say okay we're going to do this we're in do with an SBA guarantee which is probably the way a small-business loan would would look we're going to package up all of those things that we need we're going to send it to the SBA the SBA is going to review it for eligibility and then they will approve it or decline it so there is a secondary approval process that is required for the most part what the SBA is looking for is not any sort of credit worthiness or is this business going to work it's merely documentation they want to make sure that the projections have been done that the business plan exists that the if there's collateral and the SBA would like to utilize that that it is properly being utilized so the SBA would actually then approve or decline not uncredited on are these ducks in a row and all the documents been completed are you eligible from a from a guideline standpoint when I say that I mean you can't have been you can't have a felony and ups receive an SBA guarantee that includes DW is you can't have a government-backed loan in the past that went bad so you can't have had another SBA loan that you defaulted on and try and get a new SBA loan you can't have student loans that were government insured that have been defaulted on if you want to get an SBA guarantee so the SBA is going to go through all of those eligibility issues and questions to make sure that before they utilize this guarantee on you because if they give it to you they may not be you able to give it to someone else they want to make sure that you're a good person that you're in you're going to do what you say and that you know all of these other forms and documentation has been it's been met the other thing that's going to be the biggest dependent on how much time that SBA process is going to take not so much the approval or the declination from the SBA is what type of collateral are we using if you want to buy a building that takes a long time before we could actually close if we went if we need to put a lien on your home is go that's going to add some time so if you wanted to buy a building it may take 90 days you know it may take three months from application actually closing just need to be aware of that and again it depends on the type of loan and how you how your specific case goes and your banker should be able to specifically specifically speak to that and on we have a question coming in from crypto Jones on Google+ he says you mentioned that the SBA guarantee if you to vault in his question is what if you've defaulted on the student loan but eventually paid that back a great question and I'd honestly I'd have to check for the most part if you've default if you've ever defaulting on a government guarantee they're going to have a hard time extending you future credit you know future guarantees future assistance that being said contact your local SBA office or your local lender and ask them that make sure that they're aware of at the beginning of the process because that is an eligibility question that will knock your out right away thanks John you bet I think we're good to go Jim next slide Oh honestly okay so for the last three four slides here I've included some lingo some some things that we're going to refer to and that we're going to look at in in the underwriting process some of the ways that we calculate and get to that cash flow cash flow figure and this wasn't necessarily intended to be reviewed with everybody more of you know if this presentation can be you know kind of poster put out there and reviewed at a later point then you know then we can you can do that so for the most part that was the outward portion of this presentation anyone have any thoughts questions concerns we will open it up for questions I know John Kittleson just joined us in crypto thanks for the first question you know John on just giving you this is for John kiddos and just give you a bit of background we've gone through kind of small business banking loans in terms of the SBA guarantees in terms of what the banks going to look for in submission and turn in terms of kind of your business plan your financial projections so if you have any questions in regards to that please feel free to to let us l sorry I had to make sure my microphone was plugged in but yes actually uh what's a question I have it's when you're talking to a banker and sorry if you hear crackling I have a fire next to me so don't mind that crackling sound in regards to when you're applying and talking to the banker what do they look for kind of intangibly not necessarily uh you know I have this business plan like check in the boxes but intangibly like how should you present yourself or what do they look for uh yeah I mean a great question I hate to sound crass but a lot of it if we're talking about a loan under 100 grand under a couple hundred grand there is a lot of credit scoring there's a lot of automated process that are you know that we're going to go through just because we look at so many deals there's got to be some sort of automated process in place so from a presentation standpoint I would be professional you know when you you know be competent because you are going to need to pitch this to somebody but you're probably going to pitch it to a local local lender branch manager business banker whatever you know whatever it may be and you do certainly want to come across competent comfortable knowledgeable about your your industry in your field but I would say as long as you're acting professional and and comfortable with whatever your you're getting into no I I can't think of anything that's overly you know dramatic shave and wear a clean shirt I know I get it I understand yeah so Jonathan John Kittleson just finished up at our EBV Purdue program oh nice congratulations yeah it was an amazing like once-in-a-lifetime thing crypto is actually there with me oh very good very good how's your uh what's the latest with your business ideas Shan I know that you've uh oh I have a few things yeah I know I have all many ideas and stuff but yeah this right now I'm helping my dad with his we're getting a website together right now I'm actually learning coding so I can do a lot because I have another project I'll do it on the side just with like a car exhaust system it's a really really neat idea and Kryptos heard it and he thinks it's awesome so other people heard it I think it's awesome so we'll see maybe maybe I'll be making what would be most technologically advanced exhaust in the world most dynamic I mean it's there it's like I've talked to people about it it's like yeah like that's amazing so we'll see we'll see my future's really just we'll see where I go guys good always fun to hear your new ideas John thanks I'm full of ideas they they have the trouble with the idea I had the trouble with like I have too many options and too many ideas I'm like that motivational speaker was talking about nerd squirrels or whatever it's like you see his dog sees a squirrels just like squirrel like its attention zoomed up I have that problem a lot of bright lights um but you know Johnny Jonathan Sandra now I've reached it you hitting on me the SBA in the SBDC I'm you know we here at the Institute a number of our organizational programs our educational programs are running conjunction and in partnership with the SBA and they're a great great resource you know in addition obviously to them the SBDCs your local small business incubators anything like that you know to help get your ducks in a line really really can't help and it only you know speaking not from personal experience but from experience in dealing with veterans who have gone you know getting everything in line in a way that the bank looks for like Jonathan was saying can only help the process again it doesn't guarantee anything but it aids the flow of the process so John Kittleson do you have any other questions let me think hmm what let's say what's kind of the minimum credit score people should jupiter-like if they wanted to be approved like I'm sure it changes with the market and everything but now people shoot for it's a great question actually I'm glad you asked that because I hadn't made a note to mention that because so much this is driven by your personal credit because whatever business you're looking to borrow for doesn't have a history you're going to want again it's different by institution institution but 6 56 70 in order to be considered for any type of financing probably again you're right markets are going to be different and institutions will be different but I would say if you're if you're below 650 660 it's going to be tough yep I would and and there are lots of ways to repair your credit improve and improve your credit so if you think you're 6 12 months away from concept or a position where you think a bank would be willing to get involved start now when it comes to credit get a cash secured credit card if you have to clean up old judgments old medical bills old student loans whatever it is but get a free copy or credit port today and go from there very good thank you in Jonathan what's the best way to go about obtaining a report on your credit you can go directly to any of the three bureaus Experian TransUnion or Equifax there are a million companies out there that are going to sell you your free credit reports like free credit report comm or anything of that extent and you can certainly utilize those you know it'll probably cost you 20 bucks but you'll get all three bureaus and one stop or you're allowed to get your report for free once a year so if you wanted to go directly to all three you'll be able to do that as well Thanks Thanks um John can also any questions before we wrap up I think he's done a good job of answering my questions as far and I don't have anything else off top my head okay great Paul thanks you encrypt out for your questions I know that you know people who are going to be utilizing this presentation after the fact really those were great questions so I don't see any other questions out there online you know before I close I'd like to thank Jonathan he's a good friend of mine well-respected professional within the industry locally and I'm sure with an empty bank up and down so Jonathan do you have anything in closing that you'd like to say before we wrap things up no I think you know my contact information was at the beginning of this presentation email and cellphone either would be you know perfectly appropriate with additional follow-up questions and you know I respect everybody that has gone through this program and thank you for your service oh thank you Jonathan he's been a great asset to the Institute for veterans and military families you know he jumped at the opportunity to present on vetnet he's offered to be a mentor for EBV program so we can't thank you enough here to access all additional information on the Institute for veterans military families you can visit vets
syr GDU and you can find out information not only on our educational programs account of some of the other pillars of focus that we have here whether it be employment research any of them and like I mentioned please keep your eye open for our resource library which we'll be launching in the next couple of weeks here that really aims to kind of identify 10 or 12 core areas that you may have questions in and you'll be able to access documents links presentations all on that all in an effort to help you get your business off the ground turn your idea into a reality or you know grow an existing business so with that being said I'd like to thank all of you who joined us live and all of you who joined us out on YouTube and please feel free to join us on the future but that presentation thanks guys have a good day thanks Mike there's an executive back
