Sneak Preview of 2019 Commercial Loan Trends

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Next year, your company may need a commercial loan for a new facility or equipment, expanding inventory, or possibly a lucrative growth opportunity. You’ll have many options including large multi-national banks, as well as local banks with deep roots in the communities they serve. 


Before you make that important decision, keep in mind that in the most recent bank customer satisfaction survey, community banks gained the highest scores.  The following trends will also influence small and mid-size companies’ borrowing decisions in 2019.

·         Both mid-size and small companies have become increasingly disenchanted with multi-national banks’ impersonal nature. Result: They are seeking alternatives such as progressive community banks which place a strong emphasis on personal banking relationships. The banks’ decision makers live in the same community as their customers, and focus their attention on meeting local needs.

·         In this digital age, large multi-national banks’ substantial bricks-and-mortar presence carries less weight than it once did. Most community banks possess the mobile capabilities and digital banking prowess of their larger brethren. In addition, they provide a high level of responsiveness, transparency and local commitment.

·         While big and small banks have both grown their percentages of loan applications approved, look for small banks to approve a higher percentage of applicants in 2019. Big banks currently grant new business loans to about 25.3 percent of small business applicants; small banks approve about 49.1 percent. 

In today’s expanding business climate, you can expect proactive companies to take advantage of these trends to maximize growth in the upcoming year.

What business goals will drive your quest for commercial loans in 2019?

For related content, check these articles:

·         What’s the Best Debt-Equity Ratio for Your Company?

·         The Commercial Loan Term Sheet: An Important Step Before Getting a Loan

·         Debt Ratio’s Crucial Role in Landing Business Loans

How to Forge Rewarding Relationships with Your Community

Providing good products or services was once all B2B companies needed do to earn the respect of their local 18-LB-561 stock photo

business communities.  Today, that’s no longer sufficient. In this era, companies are expected to engage in business-oriented outreach that enhances the business and economic climate in the communities where they operate. Tackling causes at the grassroots level can deliver a timely and substantive business payback.

B2B companies may strive to help “at risk” teen-agers gain skills they need to find jobs. They may pitch in to help revitalize and beautify their area’s central business district. They may partner with non-profit groups addressing environmental issues impacting the area’s desirability as a place to do business. Here are several ways to cultivate a rewarding relationship with your community that helps you gain business customers.

  • Build mutually-beneficial relationships with the companies comprising your customer base. Sound out their leaders on local issues of concern to the business community, while sharing your sensitivity to community concerns.
  • Design your own company program aimed at tackling community issues. It may involve volunteerism from your team, or a collaboration between your company and a not-for-profit partner. Its objective should be to boost the business climate for all companies, and also align with your company’s own business strategy.
  • Make the initiative a central component of your company culture, one that’s part of business decisions. Reward employee participation and volunteerism. Create metrics to help gauge the program’s success and fine tune its ongoing progress.

Establishing and cultivating a rapport with your community from a business standpoint can result in a true “win-win.” It can build a stronger, more vibrant business climate for all companies in your community. At the same time, it can help your company gain the respect, trust and patronage of the very B2B customers and prospects it avidly targets.

What’s your company’s approach to business-oriented outreach in its community? 

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Why Start Now on 2019 Business Planning?

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According to business statistics, only one company in two stays in existence five years, and just one in three remains operational 10 years. The failure to plan ahead for business growth remains a prime reason for failure.  In contrast to basic business plans, growth plans examine opportunities for new business or expansion. A growth plan may, among other goals, explore ways to expand facilities, add equipment or acquire resources to meet increasing demand.

It's not always easy to create growth plans while attending to all the responsibilities of a business owner or CEO. But beating the competition requires grabbing a headstart on growth planning, such as starting to plan now for 2019.  Here are several steps to help you begin.

  • Examine revenue sources. Look at your current revenue streams and determine which additional ones you could add to make 2019 more profitable. Focus on new-revenue-building strategies that are sustainable over time, as opposed to short-lived.
  • Align with your community bank. Because your community bank works closely with you throughout the year, it can help you plan now for growth in 2019. The bank can play an advisory or mentoring role to assist in pinpointing growth opportunities and ensuring your company is prepared to take full advantage.
  • Select opportunities carefully. By starting early on your business growth plan for 2019, you will have the time to carefully sift through available opportunities to select the ones best suited to your company. This selection process is essential, because taking on too many growth opportunities can leave company resources overextended.

As in any other areas of business, starting early and getting a jump on rivals is imperative. Your early planning for 2019 can set the stage for proactive growth planning – and subsequent robust growth – in the years to come.


What areas will you focus on in this year's business growth planning?


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How Millennials’ Money Views Can Impact Your Business

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Some employers are convinced Millennials view money differently than their older counterparts. There’s strong evidence to support this belief. To a greater extent than earlier generations, Millennials appear to be more motivated by purpose than money or material goods. They may be content to earn less income and own fewer possessions, if that means they can live according to values deeply important to them.

Since Millennials now outnumber Baby Boomers as the largest living generation in the USA (Pew Research Center), smart employers keep these divergent views about money in mind when shaping their workplace culture, and when approaching compensation, benefits and 401k plans.   

  • According to a recent Fidelity study, Millennial workers will sacrifice an average $7,600 in yearly compensation, provided it enhances their career development, allows them to gain more purposeful employment, enables them to find a better corporate culture or lets them realize greater work-life balance.
  • When asked whether financial gain or a better quality work life would spur them to accept a new job offer, almost 6 in 10 (58 percent) Millennials surveyed by Fidelity preferred better work life. Many were attracted more to work settings promoting personal growth and well-being than they were to money.
  • Millennials also place a high value on vacation time. In fact, they’re three times likelier than older workers to justify large expenditures when they result in enjoyable memories, according to a Merrill Lynch study.
  • If financial planning is an indication, Millennials may be more likely to focus on details of employers’ 401k plans. Schwab found 34 percent of Millennials have written financial plans, vis-à-vis 21 and 18 percent for GenXers and Boomers.

It pays to recognize millennials’ distinctive perspectives on money. The more companies understand those views, the better able they will be to attract, retain and gain the most from Millennial employees.

What’s the most valuable insight you’ve recognized about Millennial’s monetary views?

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Community Banks Help Students Improve Their Financial Literacy

More than a decade ago, a Montecito, Calif. community bank began participating in a yearly tradition called Teach Children to Save Day. In partnership with schools, the institution helps ground pupils in money-saving habits. The bank later built on this success, launching a new year-round program called Banking on Our Youth.  The bank tea18-LB-556 blog photoms with schools and area non-profits to present economics and marketing classes, a Get Smart About Credit program, and bilingual instruction for parents.

This serves as but one example of community banks nationwide “going the extra mile” to help grade and high school students begin preparing for the increasingly complex financial world they will enter. Those efforts pay off. In two Arizona towns, a bank's financial literacy work helped student assessment test scores soar 70 percent.

Here are four additional examples of community banks teaming with area schools and other stakeholders to enhance the financial literacy of today’s youth. 

  • Allison Bartels, compliance officer at Leaders Bank in Oak Brook, Ill., teaches money management fundamentals, including saving, banking and budgeting for the future to students at many Chicago-area schools.
  • CCB Community Bank in Andalusia, Ala. has brought an online financial literacy program to area grade and high schools. Called Bonzai, the program replicates a video game, delivering budgeting and saving lessons in fun, interactive ways.
  • Nicholl Doggett, AVP Mortgage Lending at Leaders Bank, works with the organization Empowerment through Education and Exposure (EEE) to help Chicago high school students better grasp concepts like loans, types of bank accounts and the reasons for saving money.
  • Massachusetts-based Blue Hills Bank produced a musical play that travels to area K-5 classrooms, teaching kids about sticking to a money management plan.

By imparting financial skills to grade and high school youngsters today, community banks are helping forge a more financially literate society for tomorrow.

What one financial skill do you wish you had mastered back in grade or high school?

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What’s the Best Debt-Equity Ratio for Your Company?

Debt means different things to different people.  Most entrepreneurs and company owners view debt as an exceptionally valuable tool. However, they may struggle with the question of how much debt they should prudently absorb, relative to equity. 

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That relationship is called the debt-equity ratio. To determine your company’s debt-equity ratio, divide the amount of debt owed by company book value, or assets minus liabilities. A low debt-equity ratio of, for instance, 1, suggests your company is not fully leveraging the lower-cost financing tool of debt. A high debt-to-equity ratio of, say, 10, suggests the company is at risk from shouldering too much debt. Happy mediums between these extremes vary, depending on the type of company and its industry.

 Here are a few rules of thumb to help you determine the optimal debt-equity ratio to fund your company’s operations.

·     If your company is operating in an unsettled, even volatile business climate, it should aim at a lower debt-equity ratio. That’s because a sudden upheaval in the business environment could jeopardize ability to service debt.

·     If your company enjoys the benefit of holding long-term assets not susceptible to unpredictable value fluctuations, it can take on a higher debt-equity ratio. Examples of such assets include buildings and heavy equipment.

·     Your industry also can affect optimal ratios. If yours is a technology firm that invests in research, a ratio of 2 or lower is advised. Ratios between 2 and 5 are acceptable for manufacturing and publicly-traded firms.  Ratios higher than 6 are usually acceptable for banks and other types of financial companies.

 In general, getting debt and equity in optimal balance can help you gain needed loans, because bankers carefully review debt-equity ratios.

Would you like any additional information on the optimal debt-equity ratio?

For related content, check these articles:

·     The Commercial Loan Term Sheet: An Important Step Before Getting a Loan 

·     Signs It’s Time to Invest for Business Growth

Don’t Let Security Measures Vacation While You Do.

The weeks before Labor Day are peak times of the entire year for family vacations. For many, that means taking along a laptop or notebook computer, and perhaps leaving behind an unattended computer back in the office.   18-LB-555 blog photo

Unfortunately, while businesspeople nationwide savor late-summer vacations, hackers work overtime to steal their data, infect their computers with malware and access their private information over public Wi-Fi networks. If like many workers you intend to tackle even limited company business while traveling, these threats can result in sensitive company data falling prey to the schemes of the unscrupulous.

Happily, a few simple travel security tips can help ensure your security doesn’t embark on holiday at precisely the same time you do.  Use these strategies to protect all the mobile devices you take with you from encroachment via cybernetic subterfuge.

  • Use your devices’ locking mechanisms. Locks available on most mobile devices allow you to remotely disable them by using a PIN code. Make sure this lock is enabled, in case you misplace or lose your device.  
  • Lock your computer at work to prevent unauthorized access. Ask a fellow employee to occasionally check your computer to assure it’s not being used.
  • Practice Wi-Fi Wariness. Free Wi-Fi provided by a hotel or restaurant can tempt business or pleasure travelers.  Too often, though, hackers closely monitor the networks hoping to hack into sensitive company or personal data. Never use public Wi-Fi to work on your company’s business.
  • Avoid social sharing of location. Many people like to post photos and reviews on social media as they travel domestically and internationally. Hackers keep their eyes glued to these types of social media updates, enabling them to know when you’re away from the office or that a hotel room is unoccupied and ripe for invasion.

Along with updating passwords, operating systems and using the latest anti-virus protection, these steps can help ensure you savor a safe, secure summer sabbatical. 

What’s your favorite security step while traveling on business or pleasure? 

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Reassessing Treasury Management Strategy Pays Off

Why is this a critical time to re-evaluate your treasury management strategy? We can start to answer that question by
providing a brief example. Imagine a company that enjoys $50 million in annual sales and borrows at 5 percent. Simply by
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accelerating by two days the pace at which it receives payment on its accounts receivables, this company could trim costs by approximately $20,000 yearly.

Today’s rising-rate environment and more volatile economy add urgency to many companies’ goal of regularly revisiting treasury management strategies. Strengthening your cash position can boost liquidity, reduce interest expenses and enable the company to more readily obtain business loans.  Following are a few suggested tips companies should consider in reframing approaches to cash management.

  • Streamline payments. A critical step in reexamining treasury management strategy is ensuring timely collections. Make sure it’s as quick, easy and convenient as possible for customers to pay your invoices. To that end, institute prescheduled automated clearinghouse (ACH) debits to streamline collections.
  • Re-examine liquidity needs. Given the rising interest rates environment, it may be that your day-to-day operating cash, reserve cash and investment cash needs have changed. After all, rising rates impact your company’s money market deposits and interest earning checking accounts, as well as time deposits and sweep accounts. Bring your cash liquidity in step with today’s reality.
  • Upgrade your technology. One result of revisiting treasury management can be use of more advanced tech tools and information reporting. New tech options can deliver enhanced transparency and increased control.
  • Communicate about change. After revising your treasury management strategy, communicate your hopes and concerns not just to your team but also your bank. Business bankers can shepherd companies through rising-rate challenges.

The only constant in life and business is change. That makes ongoing re-assessment of treasury management strategies a business imperative.

How could treasury management strategy re-evaluation benefit your company?

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Four Steps to Faster, Better B2B Decision-Making

It’s been said a poor business decision can often be avoided by getting the opinion of a respected, 
knowledgeable colleague. A business leader found this strategy generated twin benefits.  First, the act of discussing the matter enabled her to think through the issue more clearly.  Second, her colleague’s insight brought additional clarity for making a prompt decision, and a clear path forward emerged.  18-LB-553 blog photo

This example demonstrates good decisions can be made quickly.  In today’s fast-paced business world, making good decisions quickly has never been more critical. Markets move quickly, and astute, decisive responses are essential.

Here are four ways B2B leaders can make better, faster decisions.

  • Focus on mission and prioritize. If too many criteria enter into decisions, paralysis can result.  Instead, focus on your company's mission and goals, and prioritize. Eliminate non-essential considerations, honing in on the decision yielding the one or two most mission-critical results.
  • Recognize and eliminate bias. Every leader is susceptible to his own biases. Recognize biases can infiltrate your decision-making, and eliminate them. Stay as neutral as possible while weighing multiple views and arguments.
  • Where apropos, delegate. You needn't make every decision yourself. Delegating decision-making to your team achieves two goals: It frees you to tackle other concerns and empowers employees.
  • Realize there's no perfect answer. Decision making's goal is not to arrive at the perfect answer. Its goal is to move forward with a wise decision. Recognizing you must give up other “good” answers when arriving at your chosen approach can help you move forward expeditiously.

By following these steps, you can quickly make one of the best decisions, which is to move forward swiftly so you can take advantage of opportunities when they arise.

What's your own approach to making smart, prompt decisions?


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How to Bulletproof Your Hiring Strategies

18-LB-551 blog stock photoNot long ago, one of the nation’s Big Four accounting firms launched an unconventional approach to hiring top talent. It announced it would stage its own “film festival” comprised of employee-made videos. The festival encouraged creation of videos depicting why the firm is an exciting place to work, and drew more than 300 entries.  The strategy’s success was soon emulated by companies across many industries.

As this example demonstrates, creativity’s important in hiring the right employees. And never has it been more critical to recruit the best than in this era of near-historic full-employment. Companies should strive to solidify their practices because mistakes in hiring can cost hundreds of thousands of dollars in recruiting, training and replacing workers.  Here are a few ways to strengthen your hiring strategies.

  • Develop “Future-focus” job descriptions. Avoid describing a job opening as it exists today. Instead, craft a job description hinting at the growth the position offers. Tell what the job requires today, and also how it should evolve over time, enabling candidates to evolve with it. You’ll lure candidates seeking growth.
  • Create social media content attracting talent. Use your company’s presence on social media channels like Twitter and LinkedIn to forge a brand appealing to today’s talent. Also explore new social media sites designed to connect job seekers with opportunity. More than 91 percent of employers in a recent survey report using social media to hire. The percentage will surely grow.
  • Consider Artificial Intelligence (AI). Adopting cutting-edge technologies like predictive analytics and AI isn’t the future. It’s now. Employers are already seizing on these advances to sift through candidate pools and hire.

Embrace these approaches, and you'll go a long ways toward ensuring ironclad hiring practices. What goal could be more worthy in this era of fierce competition for talent?

What hiring “best practices” has your company found to be successful?

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