“Getting a Bank Loan”

Jeffrey CheungPresident & CEO

OneCalifornia Bank1438 Webster, Oakland, Ca 94612

jcheung@onecalif.com1 510 550 8408

Three Key Areas

• Knowing What You Need

• Areas You Will Need to Have Covered Before Talking to a Banker

• Finding the Right Banker

“Knowing What You Need”

• Profits on the jobs…and cash flow from the jobs…it’s the cash flow!

• First look at the contract or contracts you need financing for:– Progress Billing– By Load Carried– Monthly Billings

• How much time passes from the time you can bill your customer and the time you will actually get paid?

• For contractors: What’s the retention release schedule?

“Knowing What You Need”

• What are the major cost categories and how often do you have to pay them?– Front end costs– Labor: every week– Supplies: 30 days– Gas– Others: overhead, bonding, insurance…YOU

• Bottom Line: How much money does it take to “float” the difference between when you get paid …and when you have to pay people & suppliers?

• How much of this can you float with your own money?

“Knowing What You Need”

• What cushion do you need to build in to take on other jobs/contracts?

• Do you need to buy more/new equipment or can you rent? Buying means making payments for at least 3 years plus.

• Having answers to the above points will help you organize your business plan and cash needs.

• Must have this down pat, realistic and organized before you talk to a banker.

“Areas You Will Need to Have Covered Before Talking to a Banker”

• Your Business Plan: where you are now and where you want to go

• Your Financial History...business & personal– Financial Statements: Accountant>Bookkeeper>you– Tax Returns: business & you– Your Personal Financial Statement– Be able to talk about these items and the NUMBERS!

• List of your contracts/jobs with:– Contract amount– Estimated cost to complete– Estimated Gross Profit– Estimated time to complete– Overhead Structure

“Areas You Will Need to Have Covered Before Talking to a Banker”

• Know what your overhead is:– Impact on your bidding structure– Impact on your profits– Impact on your volume

• The bank loan you need:– Short term: 12 mos. Line of credit– Mid-Long term: 12-60 months for equipment– Don’t mix up the two

“Areas You Will Need to Have Covered Before Talking to a Banker”

• Why you need the loan..answers to this come from knowing the answers from the first section.

• List of equipment that you can use for collateral.

• You maybe asked for a deed of trust on your house as additional collateral (especially for some SBA Loans)

“Finding the Right Banker”

• Where are you banking now?

• Do you know a banker there and is that banker a small business banker? If not ask them:– Who handles small business loans– Who handles SBA Guaranteed Loans– AND to make a referral to the appropriate

banker for you.

“Finding the Right Banker”

• Key items to cover when you talk to the bank:– What do they need to see– How long will the application take and how is

it handled– Tell them why you need the loan (remember

the timing gap)– Tell them how much you need AND when and

HOW you will pay them back (avoid the one job syndrome)

“Finding the Right Banker”

• Work your network– Ask your friends who operate businesses who they bank with– Ask you mentor who they bank with and will they refer you in– Ask you accountant/attorney/insurance broker

• Types of Bankers:– Small Bus Development Banker: handles you upfront and then

goes away– Small Bus Relationship Banker: handles you upfront and through

out the life of your relationship

• Keep you banker informed..good news and not so good news

• Use your banker as a networking source