The American Bankers Association says that many small business owners have been wondering what it takes these days to get a bank loan. Its advice: Owners should establish a personal relationship with their banker that shows how valuable their business is — and that means frequent personal contact and info-sharing on what and how the company is doing.
A small business, said the ABA, should make sure its banker is aware of all of its business with the bank “both business and personal” and that it “makes money on (the) total banking relationship.”
We passed the ABA article on to the Michigan Small Business Association and asked if it had any thoughts on it. Ben Bakken, an SBAM member with experience in banking, provided feedback.
“While I agree with much of the guidance that this article provides, I caution the reader who is a small business owner to not confuse what is (and always will be) the primary determinant for a bank extending a loan, and that is the company’s financial position and performance based on their financial statements,” said Bakken, who is CFO at American Eagle Superstore/Big Fireworks in Lansing.
“While the primary driver of revenue for banks will always be interest income, in the current banking environment (and for the foreseeable future), the ‘name of the game’ with regard to bank profitability and driving share value is non-credit revenue,” said Bakken. “Banks are focusing more and more on fee-driving services such as credit card processing, deposit gathering, payroll services, wealth management and personal banking.”
While he agrees there can be advantages for small business owners who maximize the business they have with their primary bank, “those advantages are more likely to show up in the areas of favorable pricing and fees they are offered, and less likely to show up in favorable credit approvals.”
A business struggling to get financing, due to its performance or financial position, “should not think that by bringing their credit card processing business or payroll services to the bank that such a decision will change,” he said.
Small business owners need to understand the key metrics and measurements the bank uses to make credit decisions. Small business owners may be too focused on sales growth or net income and not pay enough attention to their fixed charge coverage ratios or balance sheet leverage metrics.
“While I believe there is much value” to the guidance in this article, “I believe that financial performance and position is and will always be the first (and second, and third, etc.) factor that drives a bank’s decision on whether or not they approve a loan for a small business,” said Bakken.
Another weird spring?
Will all the rain for the past 40 days and 40 nights cause another crop disaster for Michigan farmers, like the 85-degree weather on St. Patrick’s Day last year?
Inquiring minds want to know. So we asked Jennifer Holton, a spokesperson for the Michigan Department of Agriculture and Rural Development in Lansing.
“It’s too early to say,” she replied, because there hasn’t been any planting yet.
It’s possible an asparagus spear is popping up here and there, but the asparagus harvest doesn’t normally start until the last week in April or first week in May, so it’s too early to tell there, too.
Wanted: medical device maker
The Right Place and BlendonGroup Consulting in Grand Rapids are trying to help a Canadian company find a medical device manufacturer in West Michigan to assemble an instrument used in one of its approved tests.
Karen Benson, director of Innovation Services at The Right Place, said the device has been produced in pilot quantities at another site so it has all necessary tooling. The job requires an appropriately clean environment and an assembly team that understands optical assembly, alignment and instrumental characterization. Benson said the estimated annual production will be 250 units per year.
Don Beery of BlendonGroup said the Canadian company is a client of his and specifically wants a manufacturing partner in Michigan. So far he’s had contact from four interested companies.
Beery is probably the right person to ask, since he is also executive director of the West Michigan Medical Device Consortium.
Not a good time to ask
The heavy rain last week made a big impact on a lot of businesses — especially those with flat roofs.
“COMMERCIAL FLAT ROOFS” is the big heading on top of Diekevers Roofing’s full-page ad in the phonebook Yellow Pages, so the Business Journal gave the company a quick call to find out what was going on in their world. Dave answered the phone, but he didn’t really have time to discuss it.
“We’re actually very busy taking leak calls right now,” he said.
Raking once again
The Cheesebrough Rake Factory, a living museum of early American history and Michigan’s oldest operating manufacturer, was lost to fire March 28. The meandering, multi-level wood building on the main street of the Village of Freeport lived long but died quickly. It took about an hour to burn to the ground.
Owners Ken and Pat Van Tol, sons Levi and Simeon and neighbor Hubert Blough had a brief window to rescue a few items — computers, records and some tools — before it was consumed by flames. Machines hand-built at the time of the Civil War and the hand tools used to craft wooden rakes, pitchforks and clothes-drying racks since 1872 were lost.
Clean-up operations involve state universities and historical entities. Preservation plans include keeping part of the facility and its larger equipment on the site as a landmark for future generations. The ruins will be sifted through with the goal of establishing an interpretive presentation of the mill’s historical significance to both early handcrafting and modern manufacturing.
The historic building is gone, but the heart and soul of the business is alive and well. The Van Tols took a little time to grieve their loss before facing the decisions to be made. They are rebuilding.
The business is running again, though scattered about the village in spaces offered by Cheesebrough friends.
Lumber from local timber is being sawn and exotic lumber from offshore delivered as they wait for the arrival of the new machines that will allow secondary and finish operations to begin. A modern facility will allow expansion, as the Civil War era equipment limited the types of products that could be built.
“It will probably be a better company, but it won’t be the same for our family or the Village of Freeport,” Van Tol said. “So much history was lost. So much of our past is gone, but we will take the knowledge gained over the many generations and use modern machines and the latest technology to make a larger variety of products.”
In recent years, the company centered on wooden golf accessories as many players returned to products with a longer life rather than the consumables that had become dominant over the past 50 years.
Cheesebrough’s client base covers the same territory as when it shipped by boxcar over the Americas, Europe and Russia. The only difference is that today’s box is a much smaller cardboard container, Van Tol said.