August 28, 2014
By Cary P. Yates
Special to the NNPA from the Houston Forward-Times
Myths and misconceptions about the reason banks decline loans and the rate at which this happens are as common today as ever. As a banker, it’s my goal to bring clarity to the process, and explain what it takes for a business to get a loan and why a loan application may be declined.
Let me share a few credit basics small business owners should know before applying for a loan that may make the loan review process easier to understand.
For a banker, evaluating a credit application means reviewing the five C’s of credit: credit history, collateral, capital, conditions and capacity. You may have heard of these five general areas that help determine whether a business loan will be approved. Yet here are five things you may not know about the five C’s:
Did you know both business and personal credit history are important when pursuing business credit, particularly smaller loans? Looking at credit history helps us answer the question: How has the borrower handled credit obligations? Both business and personal credit are relevant. On the personal side, a lender will look at the business owner’s history of credit management including FICO score and details of their credit record. A lender also will want to know whether the business applying for credit has paid suppliers and other business obligations in a timely manner, including those to other financial institutions.
That’s why a deep tenured business and personal credit and deposit relationship with a bank can make a difference. When you pursue a loan at a bank that knows you, a banker can see your current balances relative to 12-month averages and annual sales – and can better determine whether your business has strong enough cash flow for new credit. And a banker can see if a business avoids overdrafts. It helps tell the lender whether the business is credit-ready.
Did you know that when it comes to “capital,” a banker wants to see that an owner has a significant investment of personal capital in a business? When a lender sees the owner invest money in the business, it shows that the business owner is committed to succeeding. What’s more, a business owner with assets that can be converted into cash in case of a sudden downturn in revenue will be better able to operate his or her business and repay debt.
A lender wants to see that the assets of the business sufficiently exceed its liabilities, and to understand how quickly and easily those assets can be turned into cash.
Did you know that “conditions” are both internal and external factors that affect the ability of a business to repay a loan, as well as the intended use of the loan? For example, on the external side, conditions can be economic factors, such as the strength of the housing market for businesses that are tied closely to this important sector. In today’s improving economy, conditions in many industry segments are getting better, giving banks confidence in lending to those segments.
On the internal side, conditions include the borrower’s business experience and knowledge. A lender will ask: Is the owner someone who has extensive experience in the industry or relatively new? In some cases, business references and education are personal factors that can affect conditions.Both internal and external conditions can be important indicators of a business’ ability to survive and thrive, and therefore its ability to repay its credit obligations.
Did you know that “collateral,” when it’s required, is a secondary source of repayment to a lender in case of default? Collateral can include personal assets – like investments and CDs – and business assets – such as real estate, inventory, equipment and accounts receivable.
Collateral doesn’t replace good payment history or showing your ability to handle the proposed debt level. Nobody wins when a bank turns to the final option for repayment of liquidating collateral. In fact, it often results in a loss to the financial institution – it’s absolutely the last thing a bank wants to do. A healthy business that’s using credit the right way is a win for the business, for the bank and for the community.
Did you know that a lender looks at cash flow and debt to determine whether a business has the “capacity” to handle new credit? Before extending a loan, a banker wants to make sure a business has the ability to repay a loan given its other pre-existing loan or payment obligations. Typically lenders look for a business seeking credit to have a debt-to-income ratio of no more than 40 to 50 percent, depending on its credit score.
Profitability and cash flow are essential components of capacity. A business must have enough positive cash flow to meet both short-term and long-term commitments. A lender will carefully consider the cash flow of a business to gauge the probability of repayment.
Again, a long-term relationship with a bank can help, since the banker knows the customer, and is able to see deposit inflows to have a good idea of business income and sales.
When you understand the five C’s of credit, you have pretty good idea what it takes to get a business loan. Small business approval rates are increasing, and the reason should come as no surprise. Healthier businesses, better balance sheets, and stronger revenues mean more businesses today qualify for credit.
Now, it’s up to all of us in banking to keep spreading the word about how more small businesses can get credit-ready before pursuing a loan.
To help more small businesses achieve financial success, Wells Fargo recently introduced Wells Fargo Works for Small BusinessSM – a broad initiative to deliver resources, guidance and services for business owners. For more information, visit: WellsFargoWorks.com.
August 21, 2014
City News Service
A $30 million gift from the foundation started by the co-founder of Farmers Insurance will go toward building a residence hall for up to 600 freshman honor students, the university announced recently. “USC’s residential colleges provide supportive communities and contribute immensely to students’ academic and personal development,” said Ainsley Carry, vice provost for student affairs. The donation comes from the Thomas and Dorothy Leavey Foundation, chaired by USC Trustee Kathleen Leavey McCarthy, and the money will help build the Thomas and Dorothy Leavy Foundation Honors Hall at USC Village, which is set to open in 2017.
The village, which will include four other residential halls, will add about 2,700 beds to student housing. McCarthy and the Leavey Foundation, which has contributed to various scholarships over the years, also provided gifts that helped build the Leavey Library and McCarthy Quad.
August 07, 2014
By Hazel Trice Edney
The winner of the U. S. Minority Business Development Agency's (MBDA) Lifetime Achievement Award says the economic fate of America’s Black community “hangs in the balance” because “we are a fourth quarter people.”
Michael Grant, president of the National Bankers Association and its foundation, says, “Unlike our Hispanic and Asian brothers and sisters, we had to spend the first three quarters just getting in the game...So you see, all things being equal, our ethnic counterparts came to the game with a different mindset, a different set of circumstances, a different self-image, and already with some capital from back home.”
Grant was speaking during a joint press conference with the U. S. Black Chambers, Inc. two weeks after being notified he would receive the Minority Enterprise Development (MED) Abe Venable Legacy Lifetime Achievement Award Aug. 1.
The annual award is meant for a person who has exhibited “high standards of excellence, dedication and accomplishments over a lifetime,” said MBDA National Director Alejandra Y. Castillo, preparing to present the award. “This award is granted to two individuals who have played an integral role in the creativity and professional progress of minority business development over the course of their lives.”
The late Henry T. “Hank” Wilfong Jr., was also honored with the Legacy Award. He was founder of the National Association of Small Disadvantaged Businesses (NASDB), among a string of pioneering accomplishments that included service to presidents, governors and mayors. It was accepted by his widow, Wyllene Watson-Wilfong, who now runs the NASDB. Castillo said Wilfong was a “voice and trumpeter” for minority business development and stability.
Grant has for decades advocated for Black economic participation, growth and sustainability. In his remarks upon receiving the award, he credited strategic partnerships for his successes. His activities over the past year alone include a partnership with the U. S. Black Chambers Inc. and the Congressional Black Caucus Foundation to encourage Black organizations to make their deposits in Black-owned banks.
Speaking at the press conference, Grant also joined with Busby to call for Black businesses and consumers to “choose to work and do business as a team” by supporting each other. He described how the African-American community has struggle to attain economic parity only to be surpassed by other ethnic groups. He illustrated this by outlining the annual budgets of the three national chambers and the gross annual receipts of the businesses that they represent. According to Grant:
• The Hispanic chamber has an annual budget of $22 million. The average gross annual receipts of Hispanic businesses is $155,000.
• The Asian Chamber has an annual budget of $11 million. The average gross annual receipts of Asian businesses is $327,000.
• The African-American chamber has an annual budget of $900,000. The average gross annual receipts of African-American businesses is $71,000. And Black-owned businesses received only 1.7 percent of the guaranteed loans from the Small Business Administration last year.
Grant stressed that he did not cite the numbers to create “resentment and animosity” between the groups. He said, in the “fourth quarter,” Blacks must break free of the past and strategize to take their place in America’s economic mainstream.
During the first quarter – during slavery – “we struggled to prove that we were, indeed, men and women and not chattel, not someone’s personal property.”
During the second quarter, “we harmonized with the political agendas of President Abraham Lincoln and the radical Republicans to rebuild our lives with a reconstruction movement. We gained some equal protection under the law.”
During the third quarter, Grant said, “our social engineers used the words of the Declaration of Independence and the Constitution of the United States to mobilize national support – Black and White – for equal accommodations and we secured the right to vote.”
Today, in the fourth quarter, he concluded, “Our ethnic self-esteem was elevated when President Barack Obama ascended to the highest office in this nation.” He said despite agreement or disagreement with Obama, “we needed him to succeed” in both elections for three key reasons:
In a nutshell, those reasons were, first, to prove that “anything is possible if we’ll pull together and get on one accord”; secondly, to dispel for all time “the myth that we are not endowed with great intelligence”; and finally, “We needed to see for ourselves the limits of political power alone.”
Grant announced that he would continue to partner with the USBC to raise the level of Black business progress. “We finally have a business-oriented organization, with a clear vision, under committed, intelligent and inclusive leadership that is designed for the challenges of the 21st Century,” Grant said of the USBC, whose president, Ron Busby, also attended the MED awards ceremony.
Applauding Grant’s award, Busby said his recognition was important to underscore the role that Black banks play in the economic future and success of the nation.
“Access to capital is one of the number one concerns for African-American owned businesses,” Busby said. “And through this partnership and relationships, we feel like we have the solution to be able to increase the number of Black firms as well as grow our existing firms.”
Also applauding Grant at the MEB Awards Luncheon was former SBA Deputy Administrator Marie Johns, who said she knows he will use the distinction “to help strengthen the great platform that he already has to make sure there is the capital and the resources that Black businesses need in order to grow, create jobs and help rebuild this nation’s economy.”
Stressing the daunting task of strengthening minority-owned businesses, Castillo also announced a partnership between Busby’s USBC and the MBDA. “We need to bring all of our human capital together to make sure that minority businesses are seen and are regarded and are respected as part of the future; I should say as the integral corner of the future of this great nation,” she said.
Grant concluded, “If the past is prologue, I’m betting in the year 2020, many of the economic gaps that exist between African-Americans and other groups will close. All we have to do is choose to work and do business as a team.”
August 14, 2014
By Maya Humes
LAWT Contributing Writer
Today, there are 12 million single parent families in the United States. Single mothers head more than 80% of those 12 million families.
When Neferteri Shepherd’s marriage crumbled after 5 years and the birth of her two children, her life was immediately turned upside down. Gone were the days when she could leave her kids with her husband while she ran her daily errands; now a quick trip to the grocery store required complex coordination. Confronted with the new responsibilities that came with single motherhood, Shepherd felt vulnerable and overwhelmed.
That’s when Shepherd began to think a little bit more about what she could gain through being a single mother rather than what she could lose. She found that she was joining a powerful, unique community of women who were also raising their children on their own. When Shepherd realized that she wanted to connect with and further empower this community of women, she decided to found her own non-profit, Single Mom Planet.
Once she launched Single Mom Planet in June of 2013, she delineated her primary goals immediately. She decided that Single Mom Planet would focus upon empowering mothers in five different areas: relationships, self-image and beauty, financial literacy, spirituality, and service.
Today, in order to facilitate that empowerment, moms who join Single Mom Planet are immediately partnered with mentors who specialize in the area in which the mom seeks empowerment. If a mother wants to buy her own home, Single Mom Planet will partner her with a real estate agent. If a mother wants to work on her relationships, she will be partnered with a relationship expert. Single Mom Planet also has a large contingent of mothers and employees who write articles on their website, singlemomplanet.com, in order to encourage other single mothers.
These articles are filled with advice regarding how to enjoy “Girls Night Out”, how to “Get Fit With Your Kids”, and how to live according to the “Three Pillars of Health”.
Single Mom Planet does not focus solely upon the well being of single mothers. Currently, there are more than 22 million children being raised within single parent families. Single Mom Planet strongly considers the influence that mothers can have upon their children’s outlook on life. Shepherd emphasizes that, “When you transform the mind of a single mother and show her a brighter future, then her life will transform. And her children will transform as well. She will be able to bring more to the future of her children. Single mothers often take on this abandonment persona and they often manifest that feeling in their child. As a mom, maybe you possess certain flaws, but you don’t want your child to be limited by those same flaws.”
More than a year ago, Shepherd and the rest of her staff organized their first successful Single Mom Planet event, a brunch that allowed single parent families to unite and share their stories. “It makes me wanna cry right now just thinking about the brunch,” Shepherd recalls. “We had a 16-year-old girl talking about how she’s never seen her father. It’s so moving because you see how much hurt they have in their heart.”
The brunch was only the first in a series of events that Single Mom Planet has organized with the intention of healing single mothers along with their children. This October, Single Mom Planet is organizing a jazz festival in order to celebrate and honor single mothers and their families.
Above all, Single Mom Planet is a place where women can go to reclaim their lives. “Just know that you are so powerful,” Shepherd stresses. “Don’t let what life has shown you thus far take away your power. Don’t live in the past, move forward. Your kids are watching everything you do and everything you say. They love mama, there’s nobody like mama. We raise leaders, we raise people who change the world. What you do is not in vain. And you’re not alone. Single mom planet is here.”
July 31, 2014
LAWT News Service
The Metropolitan Transportation Board unanimously approved a first-of-its kind business assistance program for small business owners currently struggling with the construction of the Crenshaw/LAX light rail line along Crenshaw Boulevard.
A Business Solution Center will provide direct technical assistance to businesses along the Crenshaw corridor to help them through construction activities. Federal and state law prevents Metro from providing direct cash subsidies to businesses unless access to the business is denied due to construction impacts. A Business Solution Center, staffed by paid employees, will help provide business owners an individualized plan that could include financial planning advice on small business operations as well as dealing with municipal permits and regulations, legal assistance, marketing and grant/loan application management.
The pilot program is expected to provide proactive and hands-on business assistance to more than 100 businesses between 48th and 60th Streets and other areas that are significantly affected by the construction.
“The establishment of a Business Solution Center is an innovative and new approach by Metro to help some small businesses endure the construction,” Metro officials said.
The 8.5-mile Crenshaw/LAX Transit Project is a $2.058 billion light rail that will connect Metro’s Expo and Green Lines with eight new stations. When the Crenshaw/LAX line opens to the public in 2019, passengers and customers will be able to travel to work, medical care, entertainment, shopping, school and other activities all over the entire Los Angeles region. It also will help revitalize the local and regional economy.
“While this is not a perfect solution for the small businesses along this construction corridor, it is a step in the right direction,” said Supervisor Mark Ridley-Thomas. “If the Metro Board wants to pursue more rail projects in the future, we must show local small businesses that we are a committed partner during construction periods.”
Page 1 of 21