Upsize is a magazine with a single mission: to help Minnesota's small-business owners build bigger and more profitable companies, and to connect CEOs with the people, products and ideas they need to grow.
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HOW TO Finance ence," says Rick Wall, CEO of Highland Bank in Minnetonka. "If your frame of reference is 05, 06, 07—credit standards are higher, clearly. Just try to get the same home mort- gage you got then. It's not there." Money matters SIX BANKERS SHARE ADVICE FOR GETTING CRUCIAL CREDIT BUSINESS OWNERS who say they're feel- ing more scrutiny from their bankers aren't necessarily being paranoid: many bankers really are requiring more detailed informa- tion than in the years of easy credit before the late 2008's financial meltdown. "The new reality in banking is that all busi- nesses across the board are required to submit a lot more data than before," says John Kimball, senior vice president at Park Midway Bank in St. Paul. More likely those bankers are simply returning to traditional underwriting stan- dards of more sober times, before start-up entrepreneurs could slap three mortgages on their homes to get funds or veteran owners could use a sky-high appraisal on a building as collateral. "It kind of depends on your frame of refer- 16 But look further back, he says, and see a return to standards, not the dawn of new. "Lending guidelines that had been in place back in the 90s and early 2000s are prob- ably still in place. Advance rates are very consistent with back then. A lot of the crazy stuff has gone away, in my mind," Wall says. Business owners would do well to adapt to this new reality, and find a banking relation- ship that works for their company today. They should be able to find plenty: all bank- ers interviewed for this article insist that their banks have lots of money to lend, that they are actively seeking new customers or expansion of existing customers' business, and that they are competing hard for market share. So how to get yours? From six local bank- ers, excerpted and edited from interviews conducted earlier this year, here are top tips, straight talk and even some tough love so owners can gain the credit their businesses need. 1. MICHAEL ZENK Venture Bank: ABOUT RISK: "I'm a criminal justice and psychology major, and the only talent that I have is the analysis: Can this entrepreneur make their projects succeed? You've got to look backwards, how they've gotten here so far, how's their personal credit, does this industry make sense? They need to take the risk. The bank can't take all the risk. And I've had that conversa- UPSIZE ONLINE THE GROWTH GUIDE 2012 tion thousands of times, where it gets down to it, and I say, Wow, this looks fabulous, you've got a heck of a plan here. And then I ask them, What do you think the risk is for the bank if we lend the money? It's inter- esting, because 100 percent of owners say, You've got no risk. So I say, since we don't have any risk, and there isn't risk in your business, what I'd like is a $150,000 second loan on your home to secure this. And they say, Wait a minute!" SKIN IN THE GAME: "So they have to have equity, they have to have skin in the game. They have to be willing to pledge personal assets. I like the fact that when we started Venture Bank, 10 years ago, I took all my liquid assets and put them into the bank; I took a third mortgage on my house; I signed a personal guarantee for $700,000 to get our lease. So when entrepreneurs say, You'd never do that, I say, Yes I have. I'm an entre- preneur, too." 2. JOHN KIMBALL, Park Midway Bank: HOW TO GET CREDIT: "The two biggest obstacles between a good business and a credit approval are one, finding the right bank, and two, communicating with that bank. We have seen a number of small banks, and mid-sized and large, experienc- ing their own difficulties. So while in general banks right now are very liquid, there are a fairly large number of banks that are under some sort of regulatory order. So one of the first steps a borrower needs to do is go onto fdic.gov or do a Google search for the troubled banks list." TALKING TO BANKERS: "Everyone's story has become a little more complicated with bad economic conditions. Sales across the board have gone down. That's just a real- www.upsizemag.com