Wednesday, September 2, 2015
By Henry Snorton, III, CEcD, Principal Partner, Mission Vision Partner, LLC. (MVP)
I was fortunate to participate in Kentucky’s 5th Annual Women in Business Expo at the prestigious Galt House Hotel, just a few blocks away from Louisville happening “4th Street Live” venue. My session was a clinic entitled, “The Clinic: Tips That Every Borrower Should Know About a Business Loans.” The clinic was well attended and participants asked question after question. This led me to believe to write this article to expound upon this topic, “the clinic.”
I started the clinic by asking the attendees to reach into their pocket or pocketbook (because this was a women’s conference) and pull out a bill of some sort and raise it high into the air. They displayed ones, tens, twenties and hundreds. Then I said, “let me borrow that money that you have in the air until next year’s Women in Business Conference and I will repay you with interest.” You should have seen the expressions on their faces. Needless to say, my loan request was denied!
My analogy applies to a borrower walking into a bank or credit union and applying for a small business loan without any account or relationship with the bank or credit union to which they are applying. In life and business, relationships are simply important. Then, I told them about the 3 things that every borrower should know before applying for a business loan. The 3 “secret” and underlying test questions lenders and underwriters attempt to answer in order to make small business loan are listed below:
Question #1: Can the applicant/perspective borrower repay the loan?
Question #2: Will the applicant/perspective borrower repay the loan?
Question #3: What happens if the applicant/perspective borrower does not repay the loan?”
Each of the three (3) questions directly corresponds to what is known as the 5 Cs: capacity, character, collateral, capital and conditions:
· Capacity is how much money is available to repay the loan, debt ratios, etc.
· Character is the credit worthiness of the applicant, such as their payment history, credit (beacon) score, etc.
· Collateral is the assets, property, wealth, etc. that a borrower has to pledge or to use to “secure” the loan. This can include a home, vehicle, real estate, financial instrument, etc. Please note that lenders typically do not want your house or pledged collateral, but they do want to properly motivate the borrower to do all they can to repay their loan accordingly.
· Capital is the funds/money that you have or that will be contributed to the project’s (business’) total cost. For example, if the loan is for $50,000, do you have 2% capital ($1,000) or %10 ($10,000). It is rare, but possible to obtain an 100% loan because lenders want borrowers to have “skin in the game.”
· Last but certainly not least, conditions are trends, environmental issues or concerns, political implications, etc.
The process goes something like this… you visit a lender and inform them that you are interested in a business loan. They will ask you for a number of “prerequisite documents” such as a business plan, 2-3 years tax returns, governing documents, maybe form SBA 413 and of course their very own application. Once you submit this paperwork, then the underwriting process beings.
As noted above, the underwriter tries to answer question #1 using the provided documents, “can you repay the loan?” The answer is provided for by your “capacity.” Do you or will you have enough money to simply repay the loan. If no, then the loan is denied.
If yes, then the underwriter proceeds to answer question #2, “will you repay the loan?” This answer is determined by analyzing your “character/credit” and what you have available to pledge to secure or guarantee the loan, “collateral.”
If no, then the loan is denied. If yes, then the underwriter proceeds to answer question #3, “what happens if you do not repay the loan?” The underwriter evaluates the value of your collateral if the lender should need to liquidate it. The underwriter also evaluates its own risk, if its loaning 100% or less, typically less which requires you to put some “skin in the game” called “capital.” Last, the underwriter/underwriting process considers your industry’s market conditions. For example, energy and environmental are growth industries along with pets and travel. The “conditions” can help or hurt your application depending. If when answering question #3, the lender’s likeliness for loss or loss potential is higher than its profit potential, then your loan may be denied.
Now you know what to expect prior to applying for a business loan. If I can help, simply give me a call or drop me an email, Henry Snorton, III, CEcD at 270-839-3426 or firstname.lastname@example.org
Snorton is the founder and principal partner at Mission Vision Partner, LLC. (MVP). MVP serves as the #1 economic development firm that assists rural communities and undeserved markets to create jobs through small business startup, expansion and development. MVP's experts apply a practitioner-based approach that produces results in four areas: economic development, entrepreneurship & small business startup and expansion, grants and application development and training and consulting. MVP has written grants scored/evaluated by USDA RD as #1 in the Natio and partners with the Small Business Administration (SBA) and Syracuse University to deliver "Boots to Business" Service to Startup training workshops at Fort Campbell and Fort Knox, Kentucky. MVP’s has internationally credentials, national, state and local awards and recognitions that have assisted in the creation, retention and expansion of more than 400 jobs and millions in capital investment in the USA.
Thursday, October 17, 2013
The desire to pursue opportunity is shared by all mankind. All over the world, entrepreneurs, innovators, inventors, existing and potential small business owners pursue opportunity for their own reason. Some to gain wealth, others fame, freedom, peace of mind, or maybe to live in a dream realized. But, what does it look like to pursue opportunity?
Opportunity is illusive and subjective. The opportunity that I may pursue may look ridiculous to you or a complete waste of time. However, we can all agree that opportunity is positive, a set of circumstances that makes it possible to do something or an appropriate or favorable time or occasion. Thus, to pursue opportunity is also positive. However, that does not equate to achievement or success. Whether you achieve the opportunity that you pursue or not, there is one main thing that you must understand.
The most important thing that you must understand may very well be the most important key to pursuing any opportunity, movement! You must do something more than talk to achieve the opportunity in which you pursue. Faith or belief without works or action or demonstration is dead or non-existent or lifeless. So what does it look like to pursue opportunity?
I was inspired to blog about pursuing opportunity after listening to a Bishop TD Jakes sermon and watching the 1992 film, Far and Away, staring Tom Cruise and Nicole Kidman. In summation, the two were completely different but brought together in pursuit of opportunity. One was wealthy and the other poor, one educated and the other unlearned, one cultured and the other not, but they were both in Ireland and connected by the desire to own a piece of land being given away in the US in Oklahoma territory.
The photo above illustrates what it looks like to pursue opportunity. Can you imagine how more than 100,000 people felt on Cherokee Strip in Oklahoma on April 22, 1889, as they risk it all, lining up and awaiting a gunshot to race toward opportunity. History suggests that the race began with a single gunshot. Pioneers on horseback and carriages raced to stake their claims for the best acreage the area had to offer. The rush to the new lands, the pursuit of opportunity, helped establish towns such as Oklahoma City.
What do you look like as you pursue opportunity? Could it be as easy as 1 – 2 – 3? Here are a few suggestions that may help. One, you must know without a shadow of doubt “what” opportunity you are pursuing and then determine in your mind, body and soul that you are willing to do what is required to achieve it. Keep in mind that to pursue opportunity can be a short- or long-term process. If the opportunity develops for you to partner with a friend to startup a new entrepreneurship, then that is the “what” and you must determine within yourself to make it happen. Step one propels you to step two to builds momentum for step three.
Step two requires time and action or movement or activity or demonstration. Movement, activity or demonstration can include: research, preparation, investing, designing, testing, steps, often risky, that move you closer toward realizing an opportunity. Maybe you want to pitch your product or service to a certain person or company. This is the “what.” Step two requires you to discover how your product or service can add value or benefit that certain person or company. Who do you know that can help you make contact with that certain person or company? Step two demands movement. Now that you are moving-forward, you are more prepared for step three. Step three is the making it happen step.
Now that you have prepared yourself by performing research, testing, etc., it is time to do it; launch, apply or make that call. Step three can include: the launch, going to the bank to apply for the loan, signing the lease, applying for a provisional or full patent, setting up appointments to make the sale and more. Recall the picture above of what it looks like to pursue opportunity. Lets go back to the late 1800s and make the comparison using these three steps. Step one, the decision was made to travel to Oklahoma to claim a parcel of free land; step two required learning the process, procedures that will be used to claim the land, consider the competition (this was part of the wild west), review of the land to be claimed, choosing a good horse, etc; and step three, on your mark, get set, “POW,” go claim your land!
Henry Snorton, III, CNM, MPA, CEcD is founder of Mission Vision Partner, a full service economic development consulting firm that specializes in small business & entrepreneurial development, economic development and application development throughout the US that impacts communities and economies for improvement. Visit www.missionvisionpartner.com or call 270-839-3426 for more information.
Tuesday, July 9, 2013
Recently, I was invited by the Lake Barkley Chamber of Commerce (Eddyville, Kentucky) to deliver one of my firm’s (Mission Vision Partner) small business development presentations named “Brand Development 101.” For your convenience and learning pleasure, I have attached a hotlink to the training workshop uploaded to youtube.com.
It is a training module that I developed especially for the “smalls:” small business startups, existing small business owners, corporations with offices in small communities, local governments and organizations.
Brand Development 101’s goal was to effectively provide practical and usable knowledge and information about brand development and its process to assist participants to better brand their business and themselves. Like many of my trainings, I attempted to get to know my audience by asking a few intuitive questions and completing an exercise. One questions to the room of Lake Barkley Chamber members was for them to identify their favorite business establishment.
In response, one participant identified a fixture in the small, rural community of Eddyville that was locally owned named Akridge Farm Supply. Later, I researched this business online and began to understand the basis to their success as their website states, “Where customer service counts since 1933.” That is a statement or even better, principle. The reason that the participant identified Akridge Farm Supply was because of the way the business owner and staff made her “feel” each time she frequents the business. I immediately stated that her “favorite” was a great way to explain and better understand brand development 101.
Branding is about feeling, not imagery, slogans or catchy advertisement. Branding is the result of the way customers feel and think about establishment’s product(s) or service(s). Branding is a part of your company’s strategy…its much bigger than your company’s marketing plan. It is in the culture…the company’s way of life. For example, there are principles inherent to each company. Your company’s principles, whether a solopreneur (sole proprietor) or Fortune 500, spills over into the deliver of your products and services and experienced by your company’s potential and existing customers.
Customers remember and often recite exceptionally good and bad business experiences. A company develops a good brand over time, after it has delivered good, reliable and consistent quality products or services time and time again. This is the best customer retention strategy.
Next, branding is about “Awareness;” are your customers thinking about you and what do their thoughts say? Your consistent deliver of products and services, good or bad will produce “differentiation.” This relates to why or what make your customers think about you the way that they do. Another way to say this is, “the proof is in the pudding,” demonstrated from your company’s past history, customer feedback, referrals and complaints. Price is important, but not to be confused with cheapness. Customers are willing to pay for the “brands” they know, favor (feel better about) and trust (feel like they can rely upon).
Last but certainly not least, your brand is your evidence of distinction. Without distinction, you run the risk of being considered generic, or worse, a commodity. The difference between Branding and Brand Development is that development is the discovery process a company goes through to unearth (identify) its “Evidence of Distinction” and formulation of communications and strategies for differentiation. Branding is then, the tactical application of that distinction in all your communications, materials, implementation of strategies, etc. Branding and brand development is a corporate initiative.
In closing, I would like to think Vanessa Sticker, Lake Barkely Chamber’s Executive Director, Chamber attendees and Jim Stott, Chamber Chair, for the invitation and tour of the beautiful Eddyville/Lyon County community.
Henry Snorton, III is a Certified Economic Developer (CEcD) with advance education, proven success record assisting startups and existing businesses to create and retain jobs and obtain capitals. He is recognized and award recipient at the local, state and national level in the area of business and economic development. He is also an entrepreneur and founder of Mission Vision Partner (MVP). Mission Vision Partner is MVP is a full service economic development agency. MVP’s niche is assisting the "smalls" to make big impacts and to be successful producing outcomes & results. The outcomes and results that MVP assists its clients to produce are in the areas of 1) economic development, 2) small business development 3) entrepreneurial development and 4) application development. MVP believes that “two are better than one” and every team wants to play with a "MVP." MVP’s goal and value is to partner with our clients, the "smalls" to deliver their desired results.