Interview of Interest: WPO Chicago Summit Sponsor Harris N.A.

I recently had the wonderful opportunity to visit with Janice Zimmerman and Maggie O'Brien, both V.P.s and Sr. Commercial Relationship Managers at Harris N.A.  The purpose of our gathering was to get a pulse on what's going on in the "business banking" world and to determine what SMBs should be looking out for relative to economic trends.  Here's the result of our conversation.

Delaney:  As bankers working with small and mid-size businesses, are your customers seeing signs of economic recovery and is this translating to improved financial trends for their business?

Zimmerman:  The good news is that many of our customers who were hard hit by the economic downturn are beginning to see signs of stabilization, and even slight recovery.  A decline in revenues prompted some customers to undergo the painful process of “right sizing” their operations and for others it provided the impetus to seek process improvements in an attempt to offset profit erosion.

Although the consensus among economists is that the deep and wide recessionary effects will make for a slow recovery, the businesses that have reacted quickly and decisively to the downturn can more effectively compete when demand for their products/services returns.  As we have seen in prior downturns, companies that have remained well capitalized will also be better positioned to take advantage of the many opportunities for growth and expansion that provide the silver lining in the dark cloud of a recession.

Delaney:  Many businesses really struggled during 2008 and 2009 but recently their performance has improved. How long will it be before they can be approved for bank financing?

O'Brien:  Every business’ situation is different and unique, but speaking in general terms, the bank will want to ensure that the improved performance that a business is experiencing is sustainable.

Generally, the bank will want to see at least 6 – 12 months of improved performance prior to issuing new debt.  The bank will also consider the strength of a company’s balance sheet. If a company generated losses in 2008 and 2009, the equity in their company may have eroded, and the owner will need to work together with their banker to determine the appropriate balance between debt and equity to fund their company’s operations as they move forward.

Delaney:  Given your observations of how businesses fared over the last few years, what major “lessons learned” can you share with business owners out there?

O'Brien:

1. The importance of adequate capital structure. Businesses need to have the right balance of debt and equity in order to withstand a downturn.
2. While growth is of utmost priority to most business owners, the focus should be on profitable growth that is funded with the appropriate balance of debt and equity.
3. While it can be very difficult to make the changes necessary to cut overhead as revenues fall, the businesses that made these changes immediately fared much better than those that waited hoping things would turn around.
4. Although no business owner enjoys talking about the hardships the company is facing, it is critically important to maintain an open dialogue with your banker so that there are no surprises.

Delaney:  What financing programs should SMBs be aware of?

Zimmerman:  There are a number of government programs in place to help support SMBs, including financing programs offered through banks and in conjunction with the SBA, the US Treasury Department, State Treasurer’s Office and many others.  Although many of these programs are offered to support growth and expansion efforts of the SMBs, some offer relief for existing debt in the form of a refinance. Your commercial banker is your best resource to see which program may help your business.

To learn more about Harris N.A., go here.

Article of Interest: Good Forecasts Hold the Key to Good Plans

In "Cleaning the Crystal Ball," authors Tim Laseter, Casey Lichtendahl, and Yael Grushka-Cockayne for Strategy & Business talk about how intelligent forecasting can lead to better decision making.

Competence in forecasting does not mean being able to predict the future with certainty. It means accepting the role that uncertainty plays in the world, engaging in a continuous improvement process of building your firm’s forecasting capability, and paving the way for corporate success.

A good forecast leads, through either direct recommendations or informal conversation, to robust actions — actions that will be worth taking, no matter how the realities of the future unfold. 

As the authors state, "all models start with assumptions."  What are yours?

Read the entire article here.

News of Interest: Ladies, Get the Edge in Fed Contracts

Listen up WPO members! You will soon have a better chance of getting federal contracts for everything from consulting and supplies to construction and food services, thanks to new rules that give female-owned businesses an edge in the bidding process.

The Small Business Administration announced last week that it had finalized rules for its Women’s Procurement Program. This program gives female business owners access to an estimated $25 billion, 5 percent of the federal procurement budget. In some cases, it will give such businesses a slight advantage in bidding for federal contracts.

Women Impacting Public Policy is a nonpartisan group that helped bring about the changes. It has taken more than a decade to implement the program since Congress approved it in 2000, and the federal government hasn’t met its own goals for contracting with female-owned firms.

Read more here.  While you are at it, check out this piece which covers some good government contract advice (healthy dose of reality).

And please let us know when you land your first contract.  We want to report out to the Feds that this is working!

News of Interest: Background on the Small Business Bill

President Obama signed the Small Business Jobs Act, a bill that will give small businesses support and incentives to help them grow and hire.

And the bill includes eight new small business tax cuts – and applying to small businesses’ taxes for this year – providing an immediate incentive for businesses to make new investments and expand.

For example:

•  If you are a small business and you buy new equipment, you can immediately write off the first $500,000 of your investments;

•  If you are one of over one million eligible small businesses, key long-term investments in your company will be subject to zero capital gains taxes;

•  If you are an entrepreneur and take a chance on a new idea, you can deduct the first $10,000 of your start-up costs;

•  And if you are self employed you can deduct 100 percent of the cost of health insurance for you and your family from your self-employment taxes.

Read more details (including about tax cuts) here.