Originally published in the Daily Record March 2, 2010
Recently, while watching the Olympics, I recognized the similarity between pair skating and financial business partnerships.
Just like pair skaters, a financial institution should work with its business partners, following a carefully choreographed routine,
to ensure customers' needs are met.
When looking at loan requests, sometimes the bank may need additional information to be comfortable with a deal. Whether it is a concern with collateral, cash flow, equity in the deal or future liquidity, there are times when some type of assistance is needed to get an approval.
In the Greater Rochester region, we are fortunate to have a variety of organizations that help banks become more comfortable with some loan requests. The primary agency that assists banks is the Small Business Administration, a department of the federal government.
SBA programs that help banks the most are the 7(A) Guaranty Loan Program and the 504 Loan Program. The benefit to the bank with a 7(A) loan is that the federal government guarantees to the bank repayment of the loan from 50 to 75 percent of the balance if the customer cannot repay.
The 504 Loan Program is used primarily for real estate loans and allows a borrower to put a smaller down payment on the purchase of the property. The typical deal is 50-40-10, wherein the bank will lend 50 percent; the SBA, through a Community
Development Company will lend 40 percent and the borrower comes up with 10 percent.
In Rochester we also are fortunate to work with three knowledgeable, experienced and helpful CDCs — the Monroe County Industrial Development Corporation, the Rochester Economic Development Corporation and the Empire State Certified Development Corporation.
Aside from helping the banks with 504 loans, they also offer other programs that can assist local companies and promote job creation and retention.
The state, through Empire State Development, also offers banks the ability to provide businesses with affordable capital based on interest rates subsidized by state deposits. Under the program, eligible businesses can obtain loans at an interest rate that is 2 or 3 percentage points lower than the prevailing rate on such loans, making borrowing less expensive.
Just as in pairs skating, there are times when good business partners allow banks to help customers be more successful than if they were working on their own. In Rochester we are lucky to have such gold medalists to help us.