"Bank Lending Loosens", Say the Reports. Opportunity for Retailers?

According to an Associated Press report on June 18,

"Banks are making it easier for small businesses to get loans, and they're giving companies better terms and lower interest rates. 

"Banks are taking more steps to persuade small businesses to borrow,' said Dun & Bradstreet Credibility Corp. CEO Jeff Stibel. 'Interest rates are falling. Banks are willing to lend for longer terms. We're entering a New Normal,' he said."

This sentiment was echoed elsewhere.

"As the economy improves, businesses are able to get funding from traditional sources, and they are less desperate. We are starting to see a flight away from short-term, high cost money," stated Biz2Credit CEO Rohit Arora on their May Lending Index. 

Well. That sounds encouraging, doesn't it? It also might mark a fine opportunity for retailers looking to refinance, expand, or even acquire other stores.

How to take advantage? As always, especially as retailers, it is essential to do your homework.

• Make a strong case for where your business is now
• Show how your business compares favorably to others in your retail segment (the Retail Benchmarks at The ROI can help)
• Prepare a cash flow plan, showing how and when you will repay the loan 

Approach Banks That Actually Lend to Small Business

And, not to be overlooked, search out those banks most likely to lend to retailers: the community banks. 

Here are 2 useful links for you from the Resources for Retailers page of Retail Startup (one of our microsites.)

• Independent Community Banks Locator, from the Independent Community Bankers of America. Just enter your ZIP code, say how many miles you are willing to travel (from 25 to 100), and they immediately identify all the community banks in that area.

• Banking Grades.  Based on data provided by the banks to the FDIC, this organization assigns a letter grade (from A to F) to banks for their small business lending. You can search by bank name, by ZIP code, by City & State, or by county. 

And here's another one from The Retail Owners Institute site:

• The GMROI "Bankability" Rater, a very unique approach that could give you a competitive edge when making your case with lenders.

All 3 of these resources might save you time, and hopefully, frustration! And, they're all free!

Now, Lenders Compete(!) to Lend to Retailers

Is there any opportunity for a responsible retailer to get reasonable financing?! 

Our quest to find a positive answer for that question has gone on for years.

That's why we have developed a new service: Banks4Retailers.com.  

Now retailers can do their own comparison shopping - for lenders!

Here is the concept behind this new website:

• Retailer Track Provide the tools for a retailer to put together a responsible, substantive loan proposal.
• Lender Track Find lenders who are able to evaluate a retail business on its merits, not just its industry label. 
• Reviews by Retailers  We are providing a platform for retailers to share their experience with these lenders:
  • Were you treated with respect?
  • Would you refer other retailers to them?

The 5 very different organizations on the Find Lenders page provide access to over 2,500 sources of financing, from traditional banks to "alternative lenders" to investment funds. They offer streamlined matching services between a retailer's financing request and willing lenders. All online, in retail time. 

Is this what they call "disruptive lending"? 

We sure hope so! 

But, like everything else in retailing this is an on-going experiment! 

• We make no guarantees that any retailer can obtain financing. 
• We are not recommending one lender over another, nor does any lender's appearance on the site constitute our endorsement of them.

Our goal is simple: provide a free service to retailers – a no-cost, no obligation service – where lenders compete for your business.

Please go check it out. And let us know what you think. Even better, add your comments on the Review page for Banks4Retailers; share your thoughts with other retailers.

This New Normal Demands New Strategies

Yes, We Know. We Have Previously Advised Otherwise...

For retailers needing money, Outcalt & Johnson and The Retail Owners Institute® have long advised these 3 key steps:

1. Make your business bankable
2. Keep your business bankable
3. And never expect your vendors to "bank" you!!  

That still is very good advice.

Problem is, in today's economic climate, banks simply are not inclined to loan to retailers of ANY size, shape, or form! (We know; we've been trying to help retailers get financing, but with little or no success.)  Yet, to fund growth, successful retailers badly need loans.

What's a retailer to do?

Adapt! Be like The ROI. Recognize that, in this New Normal, some vendors(!) may be willing to be your new "bank".

Of course, there are caveats! To borrow from vendors, retailers must:

• Do all of the preparatory work that they would do for a bank loan (Get a quick overview from this TOPICAL TUESDAYS webinar.)  

• Treat this proposed transaction as formally (that is, at arm's length) as you would with a difficult bank.

• Offer to the vendors personally guaranteed promissory notes for all loans. (Yes, folks. This is not slow pitch!)

• Prepare and share integrated Cash Flow projections for the year(s) the loans will be outstanding.

• Make darn certain that you repay these loans on time, or preferably, early!

• Remember, if you disappoint your vendors, your "lender of last resort", you're toast!  

Okay, for those of you with good memories who are about to shout "What?! You're now telling us to ask vendors for loans?!!", we reply, 

"Yes, that's true. 

Time's have changed, and so have we. In retail, as in life, adapt or perish!"

Are You Ready? Banks - Especially Community Banks - Are Looking for Good Retailers as Customers

Those plans to grow, expand, update and upgrade that have been on hold for the last few years, due to lack of financing? They may once again be pursued!

Now is an opportune time to reach out to your banker to get the financing you need for your business.

"Data from the Federal Reserve show banks are more willing to lend and their customers are seeking more credit as both groups gain confidence in the economic outlook," according to Bloomberg News. "Easier access to low-cost financing means retailers can expand outlets and hire the staff to run them."

"Community banks participating in the Small Business Lending Fund (SBLF) have consistently increased small business lending over the past two years," said Deputy Secretary of the Treasury Neal Wolin. SBLF encourages lending to small businesses by providing capital to community banks on an incentive basis: the interest rate the banks pay is reduced as the bank increases its lending to small businesses.

Remember, it is not just retailers who have had to make adjustments in recent years to survive. So have the banks. They too are having to be far more competitive.

Even better, there are tools available to you that help to level the playing field when it comes to doing business with one of them. Here are a few to get you started:

1. First, remember that you are interviewing them!

You are looking for a lender you can work with, who respects you, and most of all, who deserves to have your business. Find someone who wants to earn it!   

2. Make a "performance based" short list of banks to interview. 

Don't limit yourself by geography. Your goal is finding a bank that understands your business. 

• Be sure to include one or more Community Banks. Go here to use the Community Bank Locator. Just enter your ZIP code, and immediately get contact info on the nearby community banks.
• Also, go here to see the Treasury Department's map and list of all Small Business Lending Fund participating banks. (That's the  incentive program described above.)   

3. Check their "grades" for Small Business lending!

Yep, banks are like any other business; see which ones make the grade! 

Go here to see the "banking grades" for Small Business lending of each bank you are considering. You can search by ZIP code, city and state, or bank name.      

4. Put together your loan proposal - and your cash flow projection.

The key: not only showing what you would do with the money you borrow, but having the cash flow plan to show when you can pay it back!

• Go here on The ROI site to see the checklist of what a Loan Proposal should include.
• Then, use the online 3-in-1 INTEGRATED Calculator  to do your own cash flow projections. 

Look, Sam's Club Is Re-Inventing Banking!

Oh my. Once again, our premise holds true: "Retailing is a mirror of society."

All sorts of traditional loan facilities have either dried up or become so very arduous that potential users are discouraged. And this dearth of debt availability - the credit crisis - shows no sign of ebbing.

"Okay," says Sam's Club, "we need to give our customers what they want, in this case, SBA-backed term loans of up to $25,000." And their pilot program has already loaned to about 100 small businesses. Cool, eh?

What we love is watching the competitive juices roil at Costco, Staples, Sears, Office Depot and others. "Let Sam's Club have this 'loyalty program' all to themselves?! Are you mad? No way!"

Banking isn't going away. It's just (finally!) being re-invented, in this case, by retailers who are listening closely to their customers.

My, but this mirror of society can foster some fascinating adjustments, and business opportunities.

Believe It or Not...SBA Loans for Retailers

Common wisdom is that banks are not lending, especially to independent retailers. "Ah, those deadbeats!"

Well, last week we did what you could do. And guess what happened? We were amazed that four banks out of four initial bank meetings took great interest in potentially loaning over one million dollars to a client of ours!

For perspective, here's a little of the background to this discovery. Our client has five stores and does about $9MM a year. (They do not own real estate.) Because they've had three years of losses, their bank of ten years has moved the account into "special credits" in order to liquidate the loan balance and/or exit our client from the bank altogether. Pretty typical of the times, we'd say.

Then recently we've become aware, as you no doubt have, that the Federal government has relaxed some of the onerous conditions around the SBA loan guarantee program, specifically "7(a)". As you can do, we had our client download the SBA's loan application form, provide all of the requested info, and then have Kinkos make nice bound copies.

Meanwhile, we found on the SBA site about seven community banks that had "PLP" status; they qualified for the SBA's Preferred Lender Program. Next, we got four of them to meet with us last Friday "for no more than 60 minutes", we promised. When they heard our request and were handed the completed SBA application, all four essentially said, "Well this is very interesting to us. We're looking at the retail sector now as a way to diversify our loan portfolio from real estate loans we currently have on the books."

"Oh, really", we exclaimed. "How sweet is that! Do other retailers know about this availability?" None of them were forthcoming with an answer. So we're taking this blogosphere route. Get the word out! The Feds aren't going to keep this liberal SBA program going forever!!

Let us know if we've helped you.