Commercial Lending: It’s about more than easy money

Greg Evans, President/Chief Banking Officer

Greg Evans, President/ Chief Banking Officer

Written by Greg Evans, President and Chief Banking Officer

I was at a community networking event one evening last week that included a group of upper-level College of Business students from Winona State University.

“How hard is it to get a business loan?” they asked.

Great question. One I get all the time.

That depends. How hard is it going to be to pay it back?

Not complex stuff, really, but far from easy in practice.

For entrepreneurs looking to start a new business or experienced business owners looking to finance growth and expansion, there really has never been a better time to borrow money. Interest rates remain at historically-low levels. Most commercial banks have fully recovered from any credit problems lingering from the recent great recession. There is plenty of liquidity in the banking system, and banks are hungry to add good quality loans to the balance sheet.

The fact is that commercial banks are in the business of making loans. The change in the regulatory environment that resulted from the recession has, perhaps, created some additional challenges but by in large solid borrowers will have choices in selecting a lender. The institutions serving the Seven Rivers Region, including Merchants Bank, are predominantly community banks and are eager to provide more loans to drive economic growth in our Main Street communities.

So, with plenty of money supply to meet commercial credit demand, how should a business owner go about choosing the right banking partner?

I would recommend looking for a banker comfortable playing the role of a trusted adviser, willing to take the time to fully understand your business and drill into the question, “How hard is it going to be to pay it back?”

For us at Merchants, commercial banking is a relationship business. When we evaluate a loan request, we are diligent in our underwriting of the transaction itself. But, we are far less interested in the single piece of here-and-now business than we are in developing a complete understanding of the total operation and being able to deliver a full suite of business banking solutions that set up a business owner for long-term success.

When I think about our best business customers, clients that immediately come to mind are those trusted relationships that have been shaped over years, even decades. I would like to think that these valued long-standing relationships are the result of one of our bankers starting with this end in mind way back when.

When a commercial lender meets with a prospective new customer, the most important consideration ought to be, “how are we going to meet this customer’s needs … not only today… but well into the future.” In the same manner, it’s advisable for the business owner to be thinking in terms of finding a partner who can become a trusted advisor for the long haul. That type of relationship isn’t forged overnight, but there are behaviors that should be evident early on to warrant the level of trust that a business owner places in a banker.

Any seasoned banker should articulate that credit underwriting will be governed by the fundamental assessment of the “5 Cs” of credit (character of the borrower, market conditions, collateral pledged as a potential secondary source of repayment, capital generally understood as “skin in the game” and capacity). In banking today, capacity – a company’s ability to absorb and repay debt – should be embraced as most fundamentally important because it reflects significantly on the viability of the business itself. Cash is what repays loans, so cash flow of the business is the best source of repayment. In addition to the fundamentals, any banker should be successful at demonstrating the following to a prospective borrower:

  • Responsiveness – business credit underwriting necessarily requires some time, but find a banker who keeps you well informed throughout the process and is available to you regularly
  • Integrity – having a trusted relationship isn’t optional; the ability to earn a high degree of trust is the price of admission for any banker deserving of the opportunity to become your banking partner
  • Thorough underwriting – scrutiny associated with credit requests should be embraced as part of the process if a banker is truly serving the best interests of the business; fundamental review of financial information, projections, business plans, etc., is necessary for everybody to feel a high degree of confidence that the debt can be serviced
  • Experience and knowledge – business owners should have an expectation that their business banker will bring a value-added component to the relationship; familiarity with specific industries and credit cycles is something you should ask your banker about to be confident about the banker’s ability to meet your needs for the long haul

At Merchants Bank, we strive to deliver on that formula in meeting the needs of our business clients. Our bank locations are small enough where our staff can know the name of each person who walks through our door. At the same time, our strength with $1.5 billion in assets allows us to deliver to the market all of the resources required to meet the financing needs of virtually any business in southeastern Minnesota and west-central Wisconsin. It’s a beneficial combination for our business clients.

I know every bank suggests it stands apart because of the personalized service it delivers and the quality of its bankers. Sometimes that’s true, but put your bank and banker to the test. Look closely at the expertise and passion of the employees. Are they responsive? Do they truly understand your business and your needs? Do they know what they are talking about? Do they care? Are they professional? Can they be trusted to say “no” when that answer truly serves your best interest and the interest of your business?

There is a good deal that goes into commercial lending, and this really only touches the surface. For any business owner, having a banker that can meet those standards is probably more important than the pricing, terms and conditions of any loan package. If you’re looking for a successful formula, do your homework and find that kind of banker. Then, build a long-term relationship.

 Loans are subject to credit approval.

Meet Dawn Garms, Mortgage Lender at Merchants

Garms,DawnWhen did you start your banking career?

Dawn: I started as a mortgage Lender with Altra in 2001. I was there for twelve years and then came to Merchants in 2013.

What is your top tip for a first time home-buyer?

Dawn: Get pre-approved first. Pre-approval helps you determine the maximum amount you can spend to purchase a home. You can also go over what to expect for monthly payments, down payments and other mortgage options with a lender at that time. It really gives you a clear picture of what you can afford and how that fits into what you’re comfortable with for your personal monthly budget.

What’s one thing your mom or dad taught you about money?

Dawn: The best thing they taught me is the importance of knowing your finances. Know what you can handle so that you are comfortable in your monthly budget.

If you won the Powerball, what’s the first thing you would do?

Dawn: I would travel all over Europe for an extended period of time, and explore all of the different countries.

Besides money, what’s your favorite green thing?

Dawn: The green of fresh trees on a mountain hike.

What’s one lesson you learned when buying your own home?

Dawn: Use a lender that is knowledge so they can guide you through the process. Buying a home should not cause a headache…it should be a smooth, pain-free process.

Subject to credit approval. Contact Dawn today to get start the application process for mortgage pre-approval. To find current mortgage rates and apply online, visit our website.

Meet Connie Fort, Assistant Manager of Consumer Loans at Merchants

Connie and her husband, Tim

Connie and her husband, Tim, at the Grand Canyon

When did you start your banking career?

Connie: Twenty-six years ago I started at Merchants in Winona as a Commercial Lending Assistant. I knew that I wanted to get into lending, so I switched and became a Customer Service Representative. I stayed in Customer Service for seven years and then became a Credit Analyst. During that time, I learned that I was the kind of person who wanted to be in front of customers. A few years later, the Consumer Lender position opened up and I’ve been here for ten years now. Before Merchants, I worked at a brewery in La Crosse…can you believe that?

What one piece of advice would you give someone looking to apply for a HELOC?

Connie: Make sure to check your credit rating. There are a few websites that allow you to download a free credit report and you can bring in the report and we can go through it together. It’s also helpful if you come with an idea of how much you want to borrow and then together we can determine how much equity you have in your home.

What’s one thing your mom or dad taught you about money?

Connie: To save, save, save. You do not buy anything until have saved for it. My parents were very frugal with their money and they passed that on to me and my two sisters.

If you won the Powerball what’s the first thing you would do?

Connie: I would buy a cabin up north. We love to be outdoors…just canoeing or spending time on the lake. It’s just an awesome way to relax and forget about everything.

Besides money, what’s your favorite green thing?

Connie: When I think of green, I think of Spring and the pretty trees and blooming flowers.

If you could start a home remodeling project right now, what would it be and why?

Connie: I want to change my bedroom because we don’t have a master bath. We’ve found out that when we have family visiting and we have to share the same bathroom it can become difficult.

Contact Connie today to start the application process for your Home Equity Line of Credit. For more information on HELOC options at Merchants Bank, visit our website.

Meet Andrea Lisowski, Consumer Loans Manager at Merchants

From l-r: Andrea's friend, Linda; her husband, Jeff and Andrea take in Lambeau Field.

From l-r: Andrea’s friend, Linda; her husband, Jeff and Andrea take in Lambeau Field.

When did you start your banking career?

Andrea: It will be thirty years this June. I have been very fortunate during my time here. I started at Merchants a floater, basically going between a few different departments like bookkeeping and proof. After that I was afforded the opportunity to learn several different positions, including being a Teller, working in our Loan Servicing Department and also as a Customer Service Representative. I’ve been in Consumer Lending for 25 years. This department has a lot of experience…we’ve all been all here a long time and have a great knowledge of several different departments.

What one piece of advice would you give someone looking to apply for a HELOC?

Andrea: Think about a HELOC as something that can meet your immediate and future needs. You need to have a longer term thought process in mind, because it’s a flexible product that has many possible uses. You may need a new roof this year, but will you have any house updates next year or the year after that? Do you have a child going to college in the near future? I believe our HELOC is one of the best products that we offer. If you’re disciplined in your borrowing, it’s an option that could make a lot of sense for you.

What’s one thing your mom or dad taught you about money?

Andrea: If you don’t have the money, you don’t buy it. They also taught me the Envelope Saving plan. It does work if you stick to it!

If you won the Powerball what’s the first thing you would do?

Andrea: My husband and I have always wanted to do a “stadium tour.” Buy luxury RV and go with some friends around the country to different baseball or football stadiums. That would be fun.

Besides money, what’s your favorite green thing?

Andrea: The green turf of a football or baseball field. My husband and I have enjoyed many great memories of our kids on the field!

If you could start a home remodeling project right now, what would it be and why?

Andrea: I would do a bathroom remodel. We’re limited in space and we only have one bathroom. I’d make our current bathroom larger and add on another where we could fit it.

Loans are subject to credit approval.

Contact Andrea today to start the application process for your Home Equity Line of Credit. For more information on HELOC options at Merchants Bank, visit our website.

Meet Mike Swanson, Senior Consumer Lender/Branch Manager at Merchants

Mike and his wife, Julie.

Mike and his wife, Julie.

When did you start your banking career?

Mike: This is my fifteenth year in banking. I actually started as a teller in high school and then transitioned to a Construction Liaison after I graduated. From there I became a Personal Banker, an Assistant Manager, and a Branch Manager. I came to Merchants three years ago as a Personal Banking Officer and am now a Senior Consumer Lender/Branch Manager.

What one piece of advice would you give someone looking to apply for a HELOC?

Mike: Be patient throughout the process and stay informed. There are a lot of rules and regulations around HELOCs and so we need ask a lot of questions and get a lot of documentation. The details of a HELOC – how it can be used, payment options and more – can also be confusing to customer as well. Make sure to ask your lender plenty of questions.

What’s one thing your mom or dad taught you about money?

Mike: Treat credit as a privilege and not a right. No one owes me an opportunity to take out a loan or a credit card. Treat money and credit with respect.

If you won the Powerball what’s the first thing you would do?

Mike: Pay off my and my wife’s student loans. After that, we’d want to travel. We have always wanted to go to Ireland. My wife studied there in college and I’d like to experience that with her.

Besides money, what’s your favorite green thing?

Mike: My wife’s eyes.

If you could start a home remodeling project right now, what would it be and why?

Mike: We have the start of bathroom in the basement that I would finish. The basement has a nice living room that was there when we moved in, but someone started to build a bathroom and never finished it. It’s that lingering project that came with the house.

Loans are subject to credit approval.

Contact Mike today to start the application process for your Home Equity Line of Credit. For more information on HELOC options at Merchants Bank, visit our website.

Meet Mary Illetschko, Mortgage Lender at Merchants

Mortgage Banking Merchants BankWhen did you start your banking/lending career?

Mary: I started as a Part Time Teller at a bank while I was going to college and then moved into personal banking shortly afterwards. I started in the mortgage business in 1991 at Old Stone Credit. Eventually, I started my own company and became an independent mortgage broker. I worked for myself for 11 years and really enjoyed it…I kept my business small and work came to me through word of mouth referrals. When the market crashed in 2008, I ended up closing my business and going to work for a small community bank. I came to Merchants in 2011 and really enjoy being a part of this team!

What is your top tip for someone looking to build a home?

Mary: Do your homework and shop for the right builder. A lot of people just look at the price when choosing a builder, however, cheaper isn’t always better! Visit several model homes in your price range and make sure you are comfortable with the builder before signing a contract. You should also go into the process pre-approved for your construction financing so you know exactly what you can afford. Knowledge is power when you’re buying or building a home.

What’s one thing your mom or dad taught you about money?

Mary: My dad retired from a career in banking after 40+ years, therefore my parents are very conservative. They instilled in me the importance of saving for the future, but also having fun while living within your means.

If you won the Powerball, what’s the first thing you would do?

Mary: I would catch the next flight to St. John’s, rent a villa on the beach and then make a call to my financial planner and attorney.

Besides money, what’s your favorite green thing?

Mary: Green grass on a golf course! I enjoy golf not only for the sport, but for the beauty and incredible views that can be found on various courses. I play on a nine hole women’s league in Woodbury and try to play at least one 18 hole round on the weekend.

Picture your dream house. What’s your favorite room and why?

Mary: I would have a large great room. It would be equipped with a wet bar, pool table and a buck hunter game. In addition, I would have a large screen TV where I could enjoy Minnesota Viking and Wild games!

Contact Mary today to get start the application process for your home building or buying project. To find current mortgage rates and apply online, visit our website.

Loans are subject to credit approval.

Meet Ann Vanderloo, Mortgage Lender at Merchants

Ann Vanderloo, Mortgage Lender

Ann Vanderloo, Mortgage Lender

When did you start your lending career?

Ann: 25 years ago at a company called Old Stone Credit. From there, I moved to First Union and then to Anchor Bank. I’m proud to say I’ve been in community banking for 18 years and six of those years have been with Merchants.

What is your top tip for someone looking to build a home?

Ann: Do your homework and shop for a good builder, your local Builders Association or a home tour is a good place to start. You also want to make sure you familiarize yourself with the whole construction process…it’s much different from buying a house. It’s important to know before you get too far if building as house is for you.

What’s one thing your mom or dad taught you about money?

Ann: Save. Save. Save. My parents were very conservative people. They taught me to spend my money wisely and keep a log of where my money is going.

If you won the Powerball what’s the first thing you would do?

Ann: I would go see a financial planner and an attorney. After that, I would take vacation. I love to travel.

Besides money, what’s your favorite green thing?

Ann: Trees and plants. We actually inherited a very large garden with our current home. It’s mostly flowers, but I enjoy keeping it up.

Picture your dream house. What’s your favorite room and why?

Ann: Just big, big kitchen. We spend so much time in the kitchen and that seems to attract your audience when you have people over. But, I would also love a three season porch.

Contact Ann today to get start the application process for your home building or buying project. To find current mortgage rates and apply online, visit our website.

Subject to credit approval.