An Inside Look at a Community Bank – Part 2

Dave Wood is CEO of Willamette Community Bank. I asked him for his insight into community banks, what makes them different, and how they can be a smart fit for small businesses. Part two of our Q&A is below. Read part one here.

What is your small business lending outlook for 2011?

From my vantage point, small business confidence remains muted. Small business credit demands are at very low levels. We have ample liquidity and are in a strong position to loan, but demand is weak. It is my opinion that small business concerns are currently geared toward a desire to see a decrease in unemployment and decreased government regulation and taxes — credit availability comes after these other items. Small business owners have not bought into the notion that the recession is over and believe it will last well into 2011. Thus, not looking to grow employment or make major or even minor capital expenditures. Small business owners believe a normal unemployment figure is 5.5% and generally do not see this occurring until sometime in 2013 — which means having to tough out 2011 and 2012.

Describe the basic elements of successful small business loan application.

A complete packet that includes: Basic information about the business, loan purpose, amount requested, business history and nature of the business, ownership structure, management resumes. We look for an understanding of the market the business will serve, its competition, how the business profiles its ideal customer or prospect, some semblance of understanding cash flow. We review financial statements (balance sheet and income statement) for a minimum of three years, personal financial statement with three years of tax returns, collateral to be offered, and the owner’s equity contribution to the business.

Can you share some common mistakes small businesses make when applying for credit?

Not following through if the bank requests additional information for your application. Another big mistake to avoid: Over-relying on your CPA to help prepare the financials and the application packet. When we ask questions and the business owner says, “You will have to call my accountant,” that’s not a good sign.

Willamette Community Bank CEO Dave Wood shared his thoughts on community banks, small business lending, and more. Read Part 1.

What is your small business lending outlook for 2011?

From my vantage point, small business confidence remains muted. Small business credit demands are at very low levels. We have ample liquidity and are in a strong position to loan, but demand is weak. It is my opinion that small business concerns are currently geared toward a desire to see a decrease in unemployment and decreased government regulation and taxes — credit availability comes after these other items. Small business owners have not bought into the notion that the recession is over and believe it will last well into 2011. Thus, no looking to grow employment or make major or even minor capital expenditures. Small business owners believe a normal unemployment figure at 5.5% and generally do not see this occurring until sometime in 2013 — which means having to tough out 2011 and 2012.

Describe the basic elements of successful small business loan application.

A complete packet that includes: Basic information about the business, loan purpose, amount requested, business history and nature of the business, ownership structure, management resumes. We look for an understanding of the market the business will serve, its competition, how the business profiles its ideal customer or prospect, some semblance of understanding cash flow. We review financial statem

Willamette Community Bank CEO Dave Wood shared his thoughts on community banks, small business lending, and more. Read Part 1.

What is your small business lending outlook for 2011?

From my vantage point, small business confidence remains muted. Small business credit demands are at very low levels. We have ample liquidity and are in a strong position to loan, but demand is weak. It is my opinion that small business concerns are currently geared toward a desire to see a decrease in unemployment and decreased government regulation and taxes — credit availability comes after these other items. Small business owners have not bought into the notion that the recession is over and believe it will last well into 2011. Thus, no looking to grow employment or make major or even minor capital expenditures. Small business owners believe a normal unemployment figure at 5.5% and generally do not see this occurring until sometime in 2013 — which means having to tough out 2011 and 2012.

Describe the basic elements of successful small business loan application.

A complete packet that includes: Basic information about the business, loan purpose, amount requested, business history and nature of the business, ownership structure, management resumes. We look for an understanding of the market the business will serve, its competition, how the business profiles its ideal customer or prospect, some semblance of understanding cash flow. We review financial statements (balance sheet and income statement) for a minimum of three years, personal financial statement with three years of tax returns, collateral to be offered, and the owner’s equity contribution to the business.

Can you share some common mistakes small businesses make when applying for credit?

Not following through if the bank requests additional information for your application. Another big mistake to avoid: Over-relying on your CPA to help prepare the financials and the application packet. When we ask questions and the business owner says, “You will have to call my accountant,” that’s not a good sign.

ents (balance sheet and income statement) for a minimum of three years, personal financial statement with three years of tax returns, collateral to be offered, and the owner’s equity contribution to the business.

Can you share some common mistakes small businesses make when applying for credit?

Not following through if the bank requests additional information for your application. Another big mistake to avoid: Over-relying on your CPA to help prepare the financials and the application packet. When we ask questions and the business owner says, “You will have to call my accountant,” that’s not a good sign.

About Kevin Casey

Kevin Casey is a regular contributor here, at InformationWeek and elsewhere. Find him on Twitter @kevinrcasey.
This entry was posted in Local and tagged , , , , , . Bookmark the permalink.
4 comments
Betty Smith
Betty Smith

A very good and informative Link about Willamette Community Bank.

Ami Kassar
Ami Kassar

Thanks for the interesting insight. We could not agree more that in general small business banks are better served to deal with the needs of small businesses and often write on this topic at my blog www.slingshotcafe.net. However, there is one key difference. If a small business is in the market for a SBA loan, they are far better off working with a SBA preferred lender who has a lot of experience in the SBA and can get a loan pre-approved in Washington. So yes, the smaller banks are great for general loans. But when it comes to the SBA - think twice before using your local banker who might only do a handful of loans a year. Experience counts.

Mariann Goff
Mariann Goff

Enjoyed reading your post because it is very timely. I belong to a "power team" with a commercial lender from a local community bank. She shared her frustration that the bank has money to lend, but often small business owners submit applications that have incomplete financial data or balance sheets that make no sense. In most cases these business owners do not see the value of having a qualified bookkeeper or accountant managing their books. Unfortunate.

Heather
Heather

I think you hit it on the head. Small business borrowing demand is really low. It isn't that we needed more credit which is where the Fed is wrong, we need to create a growing economy so the demand increases. They have it backwards right now.