The Commercial Loan Term Sheet: An Important Step before Getting a Loan

When visiting business banks to seek a commercial loan, it’s a good idea to request a commercial loan
term sheet.  A term sheet is a sign your loan request is moving forward.  It’s usually issued after the loan officer and credit officer have reached an accord on proposed terms, and before the full underwriting of the loan request. 18-LB-550 blog stock photo_cropped 

Commercial bankers use these non-binding documents to achieve a number of goals. First, a term sheet is meant to give the loan applicant a sense of the parameters and terms of the loan, should it be approved. Second, a term sheet provides the loan applicant the assurance her loan request has been formalized. And third, the offer of the term sheet is a signal to the borrower she can submit a deposit, and doesn’t need to shop other banks to determine if they can better the offer the term sheet lays out.

Here are a few ways commercial loan term sheets help your banker serve you better:

·         Term sheets are sometimes called conditional commitment letters. They are not actual commitment letters. These documents do not legally bind lenders to proceed. However, they do demonstrate lenders’ interest in making commercial loans. They also provide good faith estimates of loan terms.

·         The term sheet should summarize the primary terms and options, identifying the prospective borrower and the lender, and listing terms that start with the loan amount and include the interest rate, maturity, collateral and fee.

·         The term sheet is written in specific non-binding language. That language states that after undertaking due diligence, the lender can turn down the loan request. However, a term sheet is often a positive indication the loan will be granted.

Borrowers usually collect multiple competitive commercial loan term sheets from banks. They should also learn as much as possible about the loan-closing records of banks from which they’ve sought term sheets.

What questions do you have about commercial loan term sheets?

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Four Vital Techniques to Successfully Scale Your Company for Growth

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At its outset, a Michigan healthcare staffing company provided contingent staffing for clients’ short- and long-term personnel needs. But its owner knew her company needed to reap greater efficiencies to grow. She altered the company’s business model, changing it into an enterprise providing employees solely for permanent positions. The result was an 80 percent overhead cost reduction, and a far more profitable company.

To position for long-term success, owners must ensure revenue growth outpaces expense growth. That requires scaling operations. Adjusting business models is among ways company owners successfully scale operations. Keep reading to learn four of the most recommended strategies to successfully scale your company for growth.

  • Keep end goal clearly in mind. Successful scalability requires owners take “big picture” views of their ultimate goal. Do they want to build a company to support their life? Or do they wish to create a company they can sell? The end game must be kept in sharp focus to enable successful scaling.
  • Decide how to fuel growth. To effectively scale, owners must determine how they plan to grow. For some, the answer is to gain early investment. Others seek strategic guidance from outside experts to propel their companies to a point where taking on investors or merging with others makes sense.
  • Strive for repeat business. Companies that must regularly find new customers expend far more resources than those enjoying repeat business. To successfully scale operations, owners must plan ways to sell more to current customers, thus growing revenues without continually finding new buyers.
  • Stay open minded on financing. Getting bigger often requires adding physical space or hiring more staff. This requires capital. Gaining scalable operations demands staying creative in how to gain financing.

Keeping an eye on the prize, maintaining a plan and being creative all enhance scalability, ensuring your company has the capacity to grow.

How are you scaling operations for growth?

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Why Small Companies Thrive with Community Banks

Recently, a New Jersey community bank furnished a construction and renovation loan to a nearby historic estate.  The loan helped the estate’s owners build a new ballroom. Working with the bank, the owners gained more than a loan. The bank’s knowledge of the local market and construction industry helped them create a ballroom well matched to the area’s weddings market, ushering in increased lucrative summer bookings. 18-LB-548 blog photo

This a perfect example of why small companies – whether manufacturers, car dealers, tech or law firms, independent stores or others -- thrive working with local community banks. Local market knowhow and willingness to view customers as neighbors, not numbers, help community banks provide intangibles that go beyond lending.

Here’s how community banks help small companies flourish:

  • Community bankers don’t forget that as small companies bloom, so does the nation’s economy. They are, after all, local businesspeople themselves. As a result, small companies are more likely to enjoy a service-oriented partner willing to listen, communicate and lend.
  • Community banks answer to Main Street. Larger banks answer to Wall Street shareholders. However, community banks are deeply engaged in their towns, making them more accessible, knowledgeable and responsive to customers.
  • Timely capital access can spell the contrast between business success and failure. Fast loan decisions help small firms get a leg up on rivals.  Community bank loan decisions are made locally, so lending is often more timely.
  • Because they build relationships with small business customers, community banks are more ready to loan. A 2017 survey by the Federal Reserve Bank of New York found large banks approved just 58 percent of applicants, whereas small banks (many of them community banks) approved 76 percent.

Counsel.  Capital.  Community focus.  All these community bank benefits help small companies thrive. Is yours among those flourishing with help of community banks?

Which community banking benefit is likeliest to help your company bloom?

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Does Your Bank Go the Extra Mile?

A Midwest distributor saw an opportune moment to move into the California market.  It realized it would have to find a new West Coast bank. But to company officials’ surprise, its long-time local bank decided to follow 18-LB-546 blog photothe company to the Golden State and open west coast branch. There, the bank continued to support its customer, helping it streamline reporting and structure.

Not every business bank will literally go the extra mile on customers’ behalf. But in many ways, a bank can figuratively go the extra mile by leveraging expert treasury management process services on clients’ behalf. Here are three examples:

  • Personalized communication. It’s important to communicate on a personal level to build rapport. For instance, Leaders Bank phones customers with ACH Block and filter transaction exceptions for “approve or deny” authorizations. This “person-to-person” outreach enables Leaders to better understand customers and their needs, and strengthen the relationship.
  • Fraud consultation.  Every passing day brings new ways fraud can be perpetrated with growing ease.  A bank going the extra mile will consult with customers regarding fraud exposure on an on-going basis. The bank can help to make sure that fraud mitigating controls are in place to minimize the potential for fraud and to avoid losses.
  • Facilitating smooth transitions.  One bank using a third-party vendor arrangement to simplify customers’ acceptance of credit card payments decided to change vendors. It reached out to the customers to help them segue to the new vendor. The credit card payment process is technology intensive, so the bank also trained customers on alternative card payment processing, which in some cases led to savings.

When banks go the extra mile for you in treasury management process services, it demonstrates their genuine interest in your financial vitality. Is there an example you can share when a bank has gone the extra mile for you?


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Surmounting the Hurdles of Changing Buyer Behavior

B2B buyer behavior evolves at a mu18-LB-547 Blog stock photoch faster pace now than ever before, thanks to rapid advancements in e-commerce and social media, as well as  24/7 access to comparative data and reviews on products and services. Categorical assumptions about buying preferences are hazardous in this age of swift techno-change. To be mindful of your customers’ ever-changing expectations, consider these guidelines.


  • Not all buyer behaviors should be rated equally. Some behaviors should be viewed by companies as far more important than others. Among key changed behaviors: Growing desire for one-on-one attention, for tailored solutions and for flexible buying cycles.
  • Know your “ideal” customer.  Leverage the wealth of data available today to generate a profile of the ideal purchaser of your product or service. Campaigns focused on that buyer should be monitored and fine-tuned often to ensure they stay relevant.
  • Clear messaging. As buyer behaviors change, your products and services can remain top of mind when you deliver a clear, consistent marketing message. Studies show the most effective messaging makes no more than three major claims in ads or promotional content.
  • The power of trust. Customers tend to increasingly distrust hard-sell tactics. However they place great trust in fellow buyers' views. Meet this changing buyer behavior challenge by developing marketing initiatives which highlight positive user-generated content such as social media and customer testimonials.

In summary, today's clients expect more and are less tolerant when expectations aren’t met. When your company evolves to keep the customer’s needs foremost, and consistently meets or exceeds customer expectations, it can count on great success in the years ahead.

How does your company respond to changing buyer behaviors?


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Signs It’s Time to Invest for Business Growth

Sensing the Great Recession's impending end, partner franchisees of a national steak house chain and their building's owner embarked on a move others may have thought too risky. They made a business investment in everything from new kitchen equipment to updated interior design and a new roof.  It paid off. Soon after, the eatery reached previously unmatched sales levels and captured sky-high customer service ratings.   18-LB-544 Invest in Business blog photo 

Sensing a new, favorable shift in the economic environment in which your business operates can signal the time to invest in your business. Other harbingers exist as well. Consider all the following when determining whether to invest now in your business. 

  • The investment aligns with goals. If given opportunity to make an investment fitting perfectly with this year’s primary objectives, the time has likely arrived to take the plunge. Ask yourself if the investment will advance your company in one-, three-, six-, nine- or 12-month time horizons.  If the outlay adds value in at least two of those periods, now’s time to invest.
  • A commercial loan represents the tool required. For many companies, taking on debt to fuel business growth shouldn’t be feared. Opportunities must be seized when they present themselves. Wait until you’ve gathered necessary funds and the opportunities can vanish. When explored strategically, commercial loan debt can provide leverage necessary to ratchet your company to higher plateaus.
  • Your company faces a near-capacity situation. When your company can’t continue growing without adding new staff, new equipment, new facilities, new products, new services, new promotion or all the above, investment time has nearly arrived. When you’ve expertly strategized what’s needed to go beyond present levels, as well as its cost and ROI, investment time has fully arrived.

Throughout a typical company’s life, crucial moments to invest for growth will appear. Ability to recognize and act on those signals can be a critical factor in long-term success.

What sign heralded the moment to invest in the growth of your business?


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What You Need to Know about the New Beneficial Ownership Business Account Requirements

Beginning on May 11, 2018, The Financial Crimes Enforcement Network (FinCEN) will require all financial institutions to obtain information from business customers on who has Beneficial Ownership interest in their organization. 

The purpose behind the rule is to help our government safeguard the financial system from illicit use and fight financial crimes such as money laundering by collecting beneficial ownership information at account opening.

“To comply with this law, your bank will be asking the person that opens your new business account, or is responsible for the management of your existing business account, to complete a certification form. Typically, the certification form is completed in person at the business location, the bank, or a title company in the case of a loan closing. It’s a brief 2-page form which can be completed in just a few minutes,” says Mary Schuh, Leaders Bank VP Operations/BSA Officer.

  • What qualifies as an account? An account is a formal banking relationship established to provide or engage in services, dealings, or other financial transactions.  Examples include deposit accounts, transaction or asset accounts, and loans.  Loan renewals and other changes in terms qualify as new accounts under the rule--the certification form will need to be completed again with the new information.
  • Banks are required to obtain beneficial ownership from legal entity customers. Who is that?
Legal Entities  Entities Not Covered
Other entities established by filing
a public document with the Secretary
of State or other similar office 
 Sole Proprietorships
Unincorporated associations
Department or agency of the United States
Entities listed on the NYSE or NASDAQ
Natural persons (individuals) opening an 
account on their own behalf


The certification form will ask for the name, address, date of birth, and social security number for the beneficial owners of the company.  This includes:

  1. Any individual who directly or indirectly owns 25% or more of the equity interests of the legal entity, and
  2. One individual with significant responsibility for managing the legal entity, such as a CEO, COO, President, etc.

While some companies may not have any owners with 25% or more ownership interest (under #1), all companies must provide information on an individual with significant managerial control (under #2).  It is also possible that the same name could be listed in both sections.

Your financial institution will require a copy of the driver’s license or other identifying document for each person listed on the form. A retail bank representative or loan officer can usually answer any questions about completing the form.


How to Know if it’s Time to Change Community Banks

A business owner missed a lucrative order because she couldn’t get an increase in her line of credit fast enough from her community bank. This was indicative of her bank’s lack of responsiveness to her needs. She vowed then and there to change banks. 18-LB-542 bank blog photo

The realization you can’t count your banker among your most trusted and dependable advisors serves as a signal to switch community banks. Other telltale signs can include your bank’s refusal to lend you funding necessary to expand (even when you have excellent credentials), its interest in only serving larger companies, its failure to match your company’s growth, or a lack of stability or responsiveness among its lending officers.

Here are more key signals to determine if the time’s right to switch banks.

  • Failure to grow. You enjoyed your business banking relationship years earlier. But over time, your community bank hasn’t kept pace with your company’s growth. Now your needs exceed its legal lending limit. It’s time for a banking change.
  • Passed over. Your community bank clearly has its eyes on a bigger prize. You sense the bank seeks much larger corporate customers, and therefore regularly shortchanges your company on service and responsiveness. You need to change community banks.
  • Willingness to say “yes.” Banks are not all alike when considering loan requests. For instance, banks in your market area usually possess greater understanding of local companies like yours. This may make it easier for them to understand your company’s potential and say “yes” to your needs.
  • Sub-par customer service. You wouldn’t continue doing business with vendors who consistently provide shoddy supplies. Why remain a customer of a community bank that delivers less than superior service? Time to change.

If these or other red flags loom, don't hesitate to change community banks. It’s imperative to your company’s health and your future growth.

What factors would spur you to switch community banks?  

How Will the New Tax Laws Impact Your Business?

18-LB-543 Tax Laws photoHow great an impact the 2017 Tax Cut and Jobs Act will exert on privately held businesses has yet to be realized.  Many feel the economy will benefit from tax reform. Public companies such as Apple, American Airlines, Bank of America and AT&T have given bonuses to employees as a way of sharing the savings from the new tax bill.

Privately held companies can expect several major tax reform impacts. They include a corporate tax cut, greater deduction for capital spending, a deduction for pass-through businesses and simplified accounting.  Let’s explore each element of these tax reforms and the likely effect on your business.

  • Cut in corporate tax rate. The 2017 Tax Reform Act slashes the corporate tax rate from 35 to 21 percent. The reduction will obviously benefit companies already based in the U.S., which will pay lower taxes. Beyond that, other benefits may accrue. Reduced corporate tax rates may spur non-U.S. based companies to move headquarters to the U.S. It may also spur directors to reinvest more of their profits in their companies. Both actions would stimulate the U.S. economy.
  • Simplified accounting. Under tax reform, companies with less than $25 million in annual sales can use less complex accounting methods, including the cash rather than accrual method of accounting. Prior to tax reform passage, companies were prohibited from employing this simplified accounting method unless they had yearly sales lower than $5 million.
  • Expensing capital investment. Increased deduction for capital spending will benefit some, including telecommunications firms. Many believe immediate expensing of capital spending will accelerate investment plans.
  • Deduction for pass-through businesses. Manufacturing and real estate firms as well as architects and engineers will benefit from this tax law provision. The final agreement provides a slight break for some service businesses. It allows them to deduct 20% of certain business income. However, it phases out for service businesses of single filers with income above $157,500 and joint filers with income above $315,000.

What do you believe tax reform’s greatest impact will be on your business?


The Leaders Bank does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal and accounting advisors before entering into any transaction.


How to Turn Referrals into Customers

Many companies embrace the practice of gathering referrals from satisfied customers. But all too often, they expend their greatest energy in generating as many referral leads as possible, rather than in cultivating and converting these leads into regular customers.  17-LB-559 Referrals Blog photo

Putting as much effort into referral cultivation and conversion as into referral generation is key. It can greatly enhance the benefits of gaining referrals. As that occurs, your lead generation becomes a renewable resource.

Here are 3 essential ways to successfully cultivate and convert sales leads.

  1. Stress quality over quantity. Getting to really know a smaller number of well-qualified referrals delivers greater rewards than spreading yourself too thin with a larger number of less qualified leads. The better you get to know your prospects’ priorities and pain points, the more likely you ultimately convince them to become your customers.
  2. Don’t make assumptions. According to marketing experts, non-qualified leads have a closing ratio of 10 percent, referred leads a closing ratio of 60 percent. But that doesn’t mean they’re a lock to buy your product or service. Your company will likely have to carefully nurture those leads to boost your conversion rate.
  3. Remember let referral sources know how much you appreciate their help. Just as referred leads should be viewed as special, so too should the customers offering the leads. Showing special thanks toward referring customers builds trust, solidifies relationships, and brings future leads your way.

 Generating customer referrals is a wise strategy. When equal efforts are made to cultivate and convert those referred leads, you’ll reach the maximum sales potential.

 How do you cultivate referrals from satisfied customers?