Modified Branch Access:
All branch locations with a drive-thru will operate via drive-thru services ONLY. Read here for more detailed information.
As always, you have 24/7 access to your money via Online and Mobile Banking, as well as over 37,000 MoneyPass® and Howard Bank ATMs.
Howard Bank to merge with First National Bank. A message from our CEO.
Traditionally, Banks have been supportive partners for their customers because they help business owners grow their businesses. One example of this support is when Banks provide businesses with the funds needed to support working capital and buy assets. In today’s tenuous economy, it has become quite clear that securing financing can be a challenge. For many, it may feel as though going through the loan process may not even be worth it. The combination of constant negative media reporting on the economic crisis and the severe tightening of Bank credit has made it seem as though Banks’ support has dried up. A gap now exists between the financial needs of many businesses and what Banks are willing to do to help their customers. If the business is a start up, the gap may seem even more insurmountable. Don’t be discouraged and don’t give up hope! It is important to understand that the term Bank, as used in this article, refers to a classical and conventional view of the institution, i.e., The Bank takes our deposits and then lends money out to businesses in our community. Basic lending principles should be geared toward mitigating risk. We now know that much of the current economic upheaval has been caused by institutions that were not necessarily adhering to that basic lending principle. It goes without saying that the financial climate has changed and in turn the way Banks now have to underwrite credit has changed. For example, just a few years ago, the value of real estate was commonly used to support loans. In the current economy, real estate alone may not be sufficient collateral. So, in order to keep themselves well positioned, Banks need to ask more questions as part of their basic lending practices. The underwriting and loan approval requirements are basically the same. However, because of the depressed economy, more questions must be asked, more details must be understood, and more assurances must be attained. The good news is that Banks are lending. They are being more vigilant and more stringent but they are lending. In order to help themselves in the process, there are several steps a Business owner can take when asking a Bank for a loan. The loan process starts with the story; who are the people involved? What are their backgrounds and how have they gotten to where they are? In the case of most small businesses, the core of the business is the owner or owners. Do they have experience running a business? What else does the owner bring to the table? Several factors are considered when a Bank looks at a lending opportunity. Very often, for small business owners, personal credit history is an important factor in getting a loan. The quality of your personal credit can influence a Bank’s loan decision. You should be familiar with your credit history before you apply for a loan. Negative information on your credit report does not immediately equate to a dead end. Let the Bank know what they can expect to see on the report. Provide a detailed explanation of why the credit was reported negatively and more importantly, what you did to try to fix the negative report. An important decision making factor is the business plan. In most, if not all cases, the Bank will ask for your business plan. When you provide your Bank with a business plan, it is critical to show how the business has historically performed. How has the company generated funds and, most importantly, how will the company make enough money to cover its expenses and pay back the loan. Whether you are a start-up business or an existing business, the economy of the past eight months has proven that no one can rely on one scenario. The lack of visibility and the inability to determine what will happen in the market has made the projection process very difficult. However, you still have a product or service, you have a price in mind for this product or service and assuming you have a solid target market, you should be able to form base assumptions. There should be several layers of the projections that play out various scenarios: best case, worst case and, most importantly, breakeven. The Bank should be shown several repayment alternatives including cash flow from operations, collateral sale and other sources of income. Business plans are typically associated with new businesses. With today’s economic conditions, many established businesses need to reinvent themselves. A business plan is an effective tool that can guide even mature businesses through the process. The elements are the same; it’s a document that describes your company’s goals and means of achieving them over a period of time. The business plan is a selling document – it sells the business to investors, stakeholders and bankers. It is a document that convincingly demonstrates that your business can sell enough of its product or services to make a profit and pay back its debt. One of the best results of the business plan, other than helping to secure financing from a Bank, is the control it gives you and your employees. You will become confident of the direction of your business and how you are going to get there. In an AT&T study, entrepreneurs were asked to rate their overall success. The 42% that had written business plans rated themselves more successful than the 58% who had not. A recent start-up loan provided by Howard Bank to a local business was the direct result of a clear business plan. The winning elements of the plan and proposal were the clear, direct experience of the owner, the solid location and demographics of the market the business is operating in, a proven need for the business with clear differentiating factors. The owner was also investing close to 25% of the capital needed for the project which showed clear commitment to the deal. While the collateral support was weak in that there was not a lot of equity in their home to support the deal, the support of an SBA guaranty mitigated that risk. The ability of the new business to generate enough cash to cover its overhead, its owner’s payroll, and the repayment of the loan was evident. So, here is the take away. Lending standards have certainly tightened, but loans are still being made. Business owners can help themselves in the loan process by anticipating and understanding what the Bank will require of them, by considering alternatives for their businesses and by providing comprehensive, well-formulated business plans.