Author Archives: Charles Green

Cultivating Transaction Referral Sources

By Charles H. Green

In my lending days, I lived off the kind transaction referrals of others.

Read that sentence again slowly. Yes, of course I networked, yes, I mailed post cards, thank-you notes and even wrote newspaper articles. I made (dreaded) cold calls, worked my former client list regularly, and did everything else imaginable to keep my ear to the ground, listening out for whoever might be about to buy a commercial property, expand their company or planning to buy someone else’s business.

But my gravy train was the two-three dozen people I had known for years, who might give Borrowers Wantedme a brief–but vital–tip once every two or three years about a contract about to be signed, deal about to fall apart, or someone I ‘really needed to call.’ This short list of contacts had been cultivated over years of staying in touch, occasionally taking to lunch, and keeping the connection with, all without ever talking about business.

When lenders network, we like to think of it as a mutually beneficial meeting for both parties, but often that’s not what happens. Frequently it’s one person emerging as a trusted resource for the other, who can be reliably introduced to others to solve a problem or manage a task. And just so you know, many of these cultivated relationships never created a deal.

Did I ever reciprocate deal flow? Of course. In commercial lending, you regularly are in communication with people who have common needs: legal advice, accounting & tax work, insurance, real estate purchases and leasing, equipment leases, etc. And it was on these occasions I recognized the need for discretion in making these business introductions.

Meaning? If I was cultivating a good relationship with six commercial loan brokers (and all the other professions) simultaneously, each of them would naturally expect to be on my call list when some deal intelligence fell into my lap. So naturally I had to decide who was really most appropriate for the prospect, based on any number of factors, and be discreet about the decision lest I disrupt the relations I had with five other brokers.

The qualification for who was most appropriate had to rise above simply who had been the most beneficial to me, and instead focus on factors important to the third party and their transaction requirements.

Referral sources must be developed over time based on mutual respect for one’s craft, business sense, and ability to ensure the referring partner doesn’t get blamed if things don’t work out. You can’t forge these kind of relationships after three meetings, and you don’t advertise your circle to anyone, inside or outside the business.

One final word–if your referral network relies on your company passing along referral fees, the relationship is temporary at best. Your connection is good until a better bid comes along from someone willing to pay more. Work to gain the genuine confidence of your sources, BE a good resource for them, and together you’ll find a rewarding alliance that benefits both of you, your companies, and your clients.

SBFI offers 45+ training courses to improve commercial lending skills-get catalog here.

Subscribe to AdviceOnLoan–award-winning, weekly newsletter for commercial lenders.

We invite you to follow us: LinkedInFacebookTwitterYouTube

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Are You the ‘Best Lender?’

By Charles H. Green

I began to realize my accumulation of years when starting to notice how many times I  began sentences with the words, “well back when I……” You’ve heard someone else do that too, hopefully, always comparing the whacky world today with a better, more reasonable world some of us remember back when. Of the many ways that recollection might manifest itself, none is more apparent to me than in commercial lending.

What is the most stark difference I see these days?  First and foremost is the lack of business Super Herosknowledge held by the average commercial lender–many seem to have a shallow understanding of the lending business and the clients they work with.  Secondly, there is a significant amount of indifference to what formerly were bright ethical lines that separated bank lending from flim-flam business operators and card sharks.

Finally, there is a serious lack of investment in addressing the first problem by too many banks and most non-bank finance companies, choosing to believe they can always hire skilled talent rather than develop it, and failing to insist on maintenance of a management-led visible credit culture.

These three challenges are alive and well, observed by many others than just old timers like me, and present serious risks to the institutions and their shareholders, not to mention the economy at large. And, it doesn’t take anyone with the last name Rockefeller to recognize that the first two conditions largely rest as a result of the third condition. Read More More

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

How Lenders Can Attract Quality Business Loan Applicants

By Joe Lawrence

According to an article in Forbes.com, banks are “facing a number of challenges from technology, regulation, and startups disrupting the industry.” And at a time when lenders are beginning to see the light at the end of the tunnel after the Great Recession, it’s more important than ever that they resume their role as the gatekeeper in the small business lending community.

After the crash of 2008 and the subsequent lending crunch, many business owners felt the

Best Practices Key Showing Improving Business Quality

Best Practices Key Showing Improving Business Quality

need to look elsewhere for their loan needs and fled to the rising ‘fintech’ lenders. But after years of exorbitant interest rates and misleading truth of funding offers, many entrepreneurs are turning back to their local banks.

In fact, a 2015 survey by the Federal Reserve Bank shows that smaller banks are approving 76 percent of business loan applicants, while the oft­touted easy access alternative lenders actually approve only 71 percent of funding applicants.

But let’s be honest—bank lenders and other finance lending channels have a long way to go on improving their efforts to attract quality borrowers and build much needed long ­term business relationships. Here’s four ways you might consider to make your company more appealing for small business borrowers to work with you.

What Small Business Loan Borrowers Want

To provide the best service, traditional lenders need to change the way they think about loan applicants, viewing them as a partner in the transaction rather than just a borrower. If you can approach the application and approval process from the business owner’s point of view, it will go a long way in helping you build long­term relationships with quality applicants. Here are my four ideas to do that:

  1. Don’t expect the applicant to start the process Entrepreneurs need facts in order to make the best decisions for their business, and that includes the details of the loan process. It’s unrealistic to ask a business owner to go through a tedious loan process and then “just wait to see what happens.” Instead, tell the applicant up front what underwriters look for in loan applications so they will have a better feel for their approval prospects ahead of the application process.
  1. Acknowledge the benefits of other lending channels, but point out the differences in the financing terms, especially the funding While it’s true that an applicant can get a loan in a day from an online lender, they may not be aware of the true repayment cost. If you want to build a lasting relationship with clients, take the time to explain the rate calculations and the sum they’ll actually be required to repay. That information will demonstrate how your loan terms can save them money.
  1. At the Summit for Small Business Credit Innovations, some panelists spoke about the importance of entrepreneurs to understand how their creditworthiness affects their ability to secure a loan. Another way to help your clients and build a lasting relationship with them is to provide them with the information they need to understand this critical aspect of the process and how to positively affect their future credit scores.
  1. A recent study conducted by Pega points out how important customer service is to people when doing business with a The study shows that almost a quarter of bank customers would begin searching for a better bank if they received poor customer service. The survey points out that banks would do well to consider implementing customer service programs that focus on the needs of bank customers. Obviously, it’s important that you and all the members of your staff do all you can to make your clients feel like they are appreciated and valued.

Small business lending is rapidly changing, and in order to remain a competitive and successful participant, you should begin looking at the process from your client’s point of view. And the partnerships you’ll form by doing so will likely result in many long­term profitable relationships.

­

Guest columnist Joe Lawrence is a New Jersey real estate investor, entrepreneur, and business credit coach who works closely with lenders and investors. He shares his expertise with other business owners through Business Credit Workshop.The favorite part of my job is when people tell me how much I’ve helped them–that’s what really makes it all worth it in the end.”

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Fountainhead Raises Capital for 504 Expansion

By Charles H. Green

Fountainhead Commercial Capital announced that alternative asset manager Magnetar Capital, through its affiliated funds, invested $23 million in a Series A round of equity financing, joining an affiliate of 20 Gates Management, a New York-based asset management firm, as the first two institutional investors in Fountainhead. The funding will enable the SBA 504 lender to expand its footprint to offer owner-occupied commercial real estate loans across the country.

“Magnetar is strategic partner that allows up to leverage our operations nationwide, as  we Fountainhead Capitalbuild a stronger position from which to provide credit for small business owners and advance our mission to become the leading SBA 504 lender,” said Chris Hurn, Founder/CEO of Fountainhead.

“Since launching last year, Fountainhead has used tech-enabled solutions to dramatically accelerate the traditional originating, structuring, approval and closing times for financing commercial real estate,” said Magnetar Capital Fixed Income Portfolio Manager Michael Henriques. “Fountainhead is filling a void in the market and will help provide credit to qualifying small business owners.”

“Commercial real estate ownership is an important wealth creation strategy, and we fully believe every healthy small business in America should consider it. Through the 504 loan, we are providing a compelling alternative during what is a challenging time in commercial banking. Expertise, speed, and competitive pricing and terms from commercial lenders are what is expected. Fountainhead delivers these, while banks and other lenders increasingly do not,” said Hurn. Read More More

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Lenders–Stay Committed to the Commitment Letter

By Charles H. Green

It takes a lot of energy to prospect, identify and qualify a good loan prospect, and even more to go through the responsible rigors of gathering an application, pulling together a fully-documented loan package and submitting it for underwriting. Past that process, there’s the approval campaign, complete with foraging for answers to new questions, begging for more documents, and finding answers to all those many questions.

So why is it that after the business developer gets all that work done, including the Due Diligencecommitment letter drafted and delivered, letter signed by the client and check collected, they essentially walk away from the deal? How is it after the ‘rush to war’ required for getting a loan committed that the BDO simply leaves it to others to close and fund?

My advice: stay committed to the commitment letter. Your time and reach are limited and there’s only so many deals you can find and get approved. Dropping off the deal and depending on others to be as driven as you about the due diligence, closing details and managing the client through this process probably has more risk than the deal itself.

In fact, your priorities are probably reversed–it’s the committed loans that should be getting your full attention at the expense of other duties, because there is a deal in the oven that’s waiting to be baked. Staying tuned in to the due diligence process to keep it moving on time and being ready to extinguish any fires to ensure that the deal isn’t derailed by mistakes or manageable speed bumps on the road to funding.

Walking the deal to and through closing again keeps you in the loop in real time to deal with left-field questions or mistaken assumptions that can set transactions back for weeks, if no one knows better–like you do.

So best practice is to hold hands with your deals as long as they’re alive and don’t stop walking until the two of you cross the finish line.

SBFI offers 40+ training courses to improve commercial lending skills-get catalog here.

Subscribe to AdviceOnLoan–award-winning, weekly newsletter for commercial lenders.

What do you think? Your comments are welcome or write Director@SBFI.org.

We invite you to follow us: LinkedInFacebookTwitterYouTube

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Lender Networking: Recognize Who You’re Talking To

By Charles H. Green

Most lenders are destined to be networkers, since it’s one of the paths of least resistance to find new business, even if the circuitous path sometimes resembles panhandling for leads. You can be more successful at this activity if you train yourself to be more observant of both how you impress others with your disposition, and the many people you will encounter out there in the crowd.

Much of the success of your effort is dependent on the other party’s interest and willingness Fraudsterto network, engage with you in conversation wherever it leads, and to find value in the whole process of building relationships.

For some people, the want to talk to people regularly is very natural, and a comfortable activity in any situation: in line at the elevator, at the gas pump, or even in crowded retail store. But even those people are not always highly confident, motivated networkers. Published statistics reflect that only one in ten people is actually comfortable in striking up a relationship with a complete stranger.

Unfortunately, this means that networking is going to be difficult with most people based on their own misgivings, fears and doubts. By understanding this fact and looking for signs early in your introduction to someone can help guide your degree of engagement. Your choice will either be to settle in and go for networking gold, or cut loose early when it’s apparent that your openness is discomforting to the other party.

In that vein, there are some distinctive attributes to watch out for that can be channel markers for your efforts, to either wave you on to someone else or let you know when to drop anchor and get to know someone better. Read More More

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Lenders, Shopping for a Mentor? Be Smart About It

By Charles H. Green

Lenders generally think of networking as a mutually beneficial meeting for both parties, but usually that’s not what it is. More often, it winds up with one person asking the other for a favor, or being given a benefit devoid of any reciprocal favor in return. That’s fine, and as I’ve recommended before, you should network with vigor, because as often as not, you’ll be on the receiving end of that exchange.

But sometimes, we need advice or assistance, and we stumble into an introduction to Two Way Streetsomeone reputed to have a lot of the answers we seek. Maybe it’s the president of an association, like the Chamber, or senior partner of a real estate company with a well-known reputation. We know that they know plenty that can help us navigate faster to where we want to go.

So, we get their card, follow up too quickly and actually score a meeting with this titan. We rush to set the appointment without pausing to consider exactly what it is we want to know, need to ask or plan to say, and exhibit a series of small insults, reflecting total disregard for the generosity of the other party and rudeness on our part. Meeting day arrives, we march into the big moment, and alas, we are disappointed that we walk away with exactly the investment we used to prepare for the meeting and what gifts we arrived bearing: nothing. Read More More

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Turn Borrower Objections into Borrower Advantages

By Charles H. Green

Have you ever been guilty of quitting early? During the pursuit of new business, I’ve observed many lenders, who, upon hearing the smallest peep of prospect objections,  turn and walk away from the potential loan deal with tail between legs. After all the work they spent to find the prospect, get the meeting, listen to the story, structure a financing solution, and pitch their idea, they throw it away after the client prospect says something less than OK!

Borrowers very often don’t have a great idea of what they want, much less what they need. Objections to AdvantageToo often, they fall for the quickest offer that kind of sounds like a solution, but when pressed, I’ve found that many sign on to financing deals just because someone wants to hand them fresh cash. It’s no wonder that otherwise smart, successful people wind up with mismatched financing that eventually hurts them more than helps them, after they encountered someone who understood selling loan deals more than crafting a financing solution.

Good lenders fight back by listening to the entire story of the borrower and offering a solution that really fits the situation to everyone’s mutual benefit. If you do your best and the prospect objects, it may be that they really don’t understand the competing terms or how your solution fits in their business. So, take the time to explain it in clearer terms.

What kind of objections are you likely to hear (and how can you respond)?

The equity (down payment) requirement is too high–All banks require borrowers to own some skin in the game, a measurement of personal contribution of the resources at risk to demonstrate the borrower’s commitment. Your investment lowers the risk of over-leverage and placing assets at risk if you cannot repay excessive debt.

The payments are too high–Payments are determined by the repayment term and borrowing cost. Our analysis demonstrates you can repay this loan at the revenue levels you have estimated.

The interest rate is too high–Interest rates reflect the bank’s cost of funds, a profit and the premium for the risk of credit loss. Most bank funds cost are very similar, so if someone is suggesting a lower rate, you should carefully examine all of the other terms offered to see what trade-offs are involved, like a smaller loan, extra collateral, or shorter repayment term.

Whatever their objection–Don’t just walk away. Make your case and leave the door open for them to think through your explanation, or for the competition to fall apart.

SBFI offers 40+ training courses to improve commercial lending skills-get catalog here.

Subscribe to AdviceOnLoan–award-winning, weekly newsletter for commercial lenders.

What do you think? Your comments are welcome or write Director@SBFI.org.

We invite you to follow us on: LinkedIn Facebook Twitter YouTube

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

Show Borrowers the Money

By Charles H. Green

Sometimes we, as either conservative or unimaginative lenders, forget that there’s another party in the negotiation for a business loan, who’s also thinking about what’s on the other side of closing. Our focus tends to drift to thinking about the annual volume goals we have, or start calculating a potential commission or bonus we’ll earn, when talk gets serious about doing a deal.

The best sales lender makes sure that the borrower focuses on what’s in their future, currency 1particularly the upside of getting expansion capital or the funding for a new building, because it’s their aspirations are what drives their decision to borrow.

During the interview process, you’ll learn a lot about the business, their financial condition, and the forecasts they have. Acquiring more capital is always for building capacity or providing capital to grow the business to do even better. It’s this growth that’s at the center of the borrower’s thinking, since larger premises, more employees, or more inventory are at the heart of their ability to get more clients, revenues and hence more profits.

So when you’re at the stage with the borrower to structure a financing transaction,  make a proposal, or ask them to sign a commitment letter, show them the money. If you’re speaking about the loan, speak in terms of a specific dollar amount, rather than just citing the “loan proceeds” or other ambiguous wording. Put it in terms of the actual dollar sum: “We’re prepared to lend you $1 million, eight hundred thousand, five hundred dollars to buy that new commercial building in which you can expand your business capacity, and help you move your annual sales to over five million dollars!”

In this way, you’re taking on their mission as your own, and enunciating the real sum required to make the transaction work. You’ll give emphasis to the work you’re doing on their behalf, and adding all the details, which lets them know that you’re tuned into their side of the deal.

Don’t be shy about throwing around a lot of dollars in your conversation–it’ll let them know you mean business when it comes to capital financing.

SBFI offers 40+ training courses to improve commercial lending skills-get catalog here.

Subscribe to AdviceOnLoan–award-winning, weekly newsletter for commercial lenders.

What do you think? Your comments are welcome or write Director@SBFI.org.

We invite you to follow us on: LinkedIn Facebook Twitter YouTube

Share This
Twitter LinkedIn Digg Reddit StumbleUpon  

If You Don’t Want the Answer, Don’t Ask the Question

By Charles H. Green

Commercial lending is usually a complicated affair with a gazillion moving parts that lenders need the understanding of to adequately quantify risks and assess the ability to repay. To gather that information from every client requires the acquisition and review of dozens of documents and the answers to many more dozens of questions. But unfortunately, too many lenders don’t stop there.

Sometimes an unfocused business developer gets off on a tangent talking about random Question Mark signsubjects that have nothing to do with what should be the only topic at hand: can this business qualify for financing? Sometimes, competing departments in your bank want you to start qualifying this customer for some other business than your business–their business.

I think commercial lending is too complicated of a proposition to qualify and sell, while simultaneously figuring out if my company might later sell them insurance, cash management or foreign exchange or other products that can wait for another day. And in my experience, 100% of my clients agreed.


Experts agree: staff training boosts revenues and lower costs.
Download SBFI’s lender training course catalog here.


If your job is selling commercial loans, you need to focus 100% of your attention on qualifying that client for a commercial loan. You can sort out ancillary products and services for a broader ‘relationship’ tomorrow after loan closing. Don’t let the chump change of referral fees, spiffs, or ‘atta-boys’ thrown at you for doing someone else’s work slow down your drive to getting what you want–loan business.

When you prioritize those dozens of questions in the client interview, throw out any that don’t immediately pertain to the business at hand: can this prospect meet our credit criteria and does their operation have the ability to repay this obligation? Everything else will wait.

Your client will agree.

SBFI offers 40+ training courses to improve commercial lending skills-get catalog here.

Subscribe to AdviceOnLoan–award-winning, weekly newsletter for commercial lenders.

What do you think? Your comments are welcome or write Director@SBFI.org.

We invite you to follow us on: LinkedIn Facebook Twitter YouTube

Share This
Twitter LinkedIn Digg Reddit StumbleUpon