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Business Lending Basics

Business Lending Basics. Dave Esworthy October 15, 2015. About First United Bank & Trust A Local, Community Bank. Headquartered in Oakland MD since 1900 $1.3 Billion in assets; $700 M illion in assets under management in Trust & Investments Division

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Business Lending Basics

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  1. Business Lending Basics Dave Esworthy October 15, 2015

  2. About First United Bank & Trust A Local, Community Bank • Headquartered in Oakland MD since 1900 • $1.3 Billion in assets; • $700 Million in assets under management in Trust & Investments Division • 25 offices in Maryland and bordering West Virginia communities • Deep commitment to each community we serve • Responsive and attentive service through local decision making and dedicated relationship management • Talented staff offering expert advice in banking and long term financial planning

  3. Lending Environment • Tension within the industry • Regulatory pressure • Financial statement scrutiny • Need for loan growth • Relatively low demand

  4. Start with Personal Finances • Assess personal financial condition • Personal credit • AnnualCreditReport.com / 877-322-8228 • Credit reports available from • Experian • Equifax • Transunion • Request all 3 annually OR • Request one bureau at different times in the year • Take Action • Clean up public records • Pay down revolving debt - credit cards (balance to available ratio) • Minimize inquiries • Examples

  5. Start with Personal Finances • Personal financial statement • Bank form • Create your own • Example • Personal Tax returns • 3 years

  6. Business Information • Business plan (start-up & ongoing) • Organizational structure • Product • Market • Projections 3-5 years • SCORE • https://www.score.org/resources/business-plan-template-startup-business • Financial statements & quality– 3 years • Spreadsheet • QuickBooks • CPA Compiled • CPA Reviewed • CPA Audited • Tax returns – 3 years

  7. Business Information • Key factors • Conditions • Story (business plan) • Plausible • Credible • Character • Credit • Collateral • Capital • Liquidity • Skin in the game • Capacity (cash flow) • Example

  8. Underwriting Priorities • Cash flow • Net income + interest expense + depreciation/debt • Officer salaries • Secondary source of repayment • Guarantors • Collateral • Credit history • Balance Sheet • Liquidity • Account Receivables Aging • Equity

  9. Loan Options • Line of credit (LOC) or term loan • Small Business Administration (SBA) Loan • Partial guarantee by SBA • Fees • Great for start-ups • Secured • Cash/liquid investments • Real estate • Commercial • Residence • Equipment/Vehicle(s) • Tenant improvements • Receivables • Unsecured • Add co-borrower

  10. Choosing a Lender • Relationshipversus price • Advisor role vs. transaction • Price – rate and fees • Underwriting standards • Other banking services • Payments/transactions • Cash management • Fees • Funds availability • Service quality • Convenience

  11. Questions/Discussion Dave Esworthy desworthy@mybank4.com 301-662-5023 mybank4.com

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