I was fortunate to have the opportunity to learn about commercial lending and entrepreneurship from the perspective of two commercial bankers in one interview.
George Madden is a Senior Vice President of SunTrust Bank and has been a commercial banker since 1978, specializing in “giving clients accessibility, responsiveness, and results in their banking relationship.” His colleague, Daryl Griffith, is a Vice President and Commercial Relationship Manager with SunTrust Bank and has over a decade of experience working with business owners, and often consults with entrepreneurs seeking funding for their new venture.
I gained insights both on commercial banking and entrepreneurship from both gentlemen, and here are some highlights…
To start with, we should understand what their jobs are like. Both gentlemen have similar roles, but serve businesses that have different ranges of revenue: Mr. Griffith works with businesses that have revenues from $1 million to $5 million, and Mr. Madden works with businesses from $5 million to $100 million in annual revenue (branch managers work with businesses under $1 million including startups, with which Mr. Griffith is often asked to consult by the branch manager).
Both men serve as the primary points of contact for their customers, and attend to their customers financial needs either directly or by connecting their client with the appropriate team member to handle the need. Aside from assisting their current clients, they spend a good portion of time seeking new business, researching companies they would like to service, looking for a connection who can make an introduction, but also doing some “cold calling” when necessary. Mr. Madden said that (paraphrase) competition has increased greatly over the years and today bankers can no longer sit inside and wait for business come to them.
Entrepreneurs should note that the competition Mr. Madden mentioned is a good thing: it should lead to better loan rates, but also more potential banking sources who could fund you when others won’t. So don’t stop trying after an initial rejection. Mr. Madden discussed how he granted a loan to a young entrepreneur when others wouldn’t back in 1985 (it’s roughly in the middle of our interview, which you can download the audio file of below).
One insight to be aware of is that commercial bankers have to be prudent in assessing the risk that the bank will be repaid. They lend other people’s deposits/money which is FDIC insured, so the government tries to ensure banks are cautious when lending. Entrepreneurs, on the other hand, often finance themselves with their own money (often from savings and/or their credit cards) and thus they (and often their family and friends) can choose whether to fund the endeavor or not. But banks have to be particularly cautious about how much risk they can afford.
So can startup businesses gain bank financing?
Yes, but under certain conditions. Mr. Griffith said that they are much more likely to fund a plumber who has 10 years of experience and is wanting to start his own plumbing business as opposed to an entrepreneur who has a good idea but little or no experience in an industry. Further, entrepreneurs need a good personal credit score as it indicates character and a track record for timely payment (or lack thereof). Furthermore, the most important aspect they assess is the “ability to repay” a potential loan. They assess cash flow and specifically want to see $1.50 income for every $1.00 of debt.
If new ventures don’t yet have enough strengths to gain bank financing, Mr. Griffith noted that government-backed SBA (Small Business Association: SBA.gov) loans give them the opportunity to make some loans they otherwise could not. (SBA loans don’t have quite as strict standards to meet, and the government will actually reimburse the lender if the borrower defaults.)
If a startup cannot yet meet SBA standards either, Mr. Griffith often refers entrepreneurs to either local SCORE counselors (score.org) or a local business incubator, both of which can provide the coaching to further a business to where they can gain bank funding. I asked about possible referrals to local angel investors, and Mr. Griffith said that most angels (that he’s aware of) typically stick with technology-based ventures, so they are not a common option for many entrepreneurial endeavors.
For the exact answers, more details, and additional insights, you can download the full 30:52 interview* as an MP3 audio file HERE.
*About the interview, I (Bill Miller) happen to be a ventilator-dependent quadriplegic, and thus my speech can be “uneven” at times. Also, because of my physical situation, I currently live at home, and my well-intentioned father (who knows both bankers) didn’t realize we were recording the interview and he slightly interrupted us when Mr. Madden was answering the last question (by offering them a healthy sample of wheatgrass juice — to which I exclaimed “Dad!” in about the last twenty seconds of the recording). I left the interruption on the file as it also contained the interview conclusion (and provided a tiny bit of comic relief — though I should’ve made sure we were not to be interrupted; that was my mistake from which I’ll learn).
Sincerely,
Bill Miller :-)
C1-2 Quadriplegic with a 255 High Bowling Game
Co-founder of Manufacturing Genuine Thrills Inc. d/b/a MGT
Business website: http://www.ikanbowler.com
Personal website: http://www.lookmomnohands.net
