Ann Arbor Business Monthly August 2015 : Page 1

BUSINESS MONTHLY • ann arbor • chelsea • dexter • manchester • milan • saline • whitmore lake • ypsilanti ann arbor area Volume 11, No. 6 August 2015 $2.00 Small Businesses Working With Local Bankers By Duane Ramsey Many small businesses depend on local community banks for their commercial banking and borrowing needs. In return, those community banks help small businesses to obtain capital to expand and create jobs. “Small business is what we do. It’s our target market, our bread and butter, the reason we exist,” said Charlie Crone, executive vice president and chief revenue of fi cer at the Bank of Ann Arbor, and a 37-year veteran of commercial banking in the local community. “It’s a hands-on, face-to-face business. We try to get to know the business owner who knows the people at our bank who understand their business model,” Crone explained. “We try very hard to always respond positively to meet their business banking needs. It’s sometimes dif fi cult for the banking industry to meet, but we try hard to fi nd a way to say yes,” he said. The assessment of a bank should include knowledge of its banking products, your business, your customers and vendors. Small business owners should think about having personal chemistry with the people at their bank,” Crone added. “Do people at the bank ask good questions and do they understand your business. Are they being creative to meet your INSIDE: Michigan Receives $5.5 Million In Funding For Preparedness – Page 5 Your Credit Report: Can You Afford To Ignore It? – Page 6 Application Deadline For Quali fi ed Forest Program – Page 7 July Washtenaw County Real Estate Trends – Page 8 Legal Matters – Page 9 Small Business and the Internet by Mike Gould “Latest In Malware” – Page 11 business “briefs” – Pages 12-15 September 2015 23rd Annual U-M IMPACT Edition Deadline: August 21, 2015 Janice Sigler of Blank Slate Creamery and Phil Weiss of Ann Arbor State Bank are pictured in the new business in downtown Ann Arbor. (Photo by Duane Ramsey) needs? Can you meet face-to-face with them and have multiple ways to reach people at the bank? Do they respond to your questions quickly? That’s very important,” Crone explained. “The depth of relationship, how many people you know at the bank from teller to CEO. It’s important to know the people at the bank especially the decision makers,” he added. What’s the capacity of the institution and will it meet your needs? The fi nancial health of the bank is also critical. Is it growing, pro fi table, well-capitalized, and sustainable? “A bank has to be strong enough to sustain economic downturns,” said Crone. “Are they competitive but not necessarily the cheapest?” Crone reported that a longtime retail business owner in downtown Ann Arbor recently moved their business to them for many of those reasons. “A very successful commercial contractor in the community came from another institution and moved all their banking to us last year. We provided fi nancing for an apartment complex the owners were investing in along with a line of credit,” Crone said. Bank of Ann Arbor has several hundred small business clients in the Ann Arbor area, according to Crone. With its of fi ce in Plymouth, it also does business in western Wayne and southern Oakland County, he reported. Bank of Ann Arbor has provided commercial banking services and loans to local small businesses over the past 20 years. Privately-owned, the bank has about 300 shareholders, about half of whom are directors and employees who live in the community, Crone said. University Bank in Ann Arbor is another community bank that is committed to helping Banking (Continued Page 3) ann arbor area BUSINESS MONTHLY P. O. Box 460 Hamburg, MI 48139-0460 PRSRT STD US POSTAGE PAID ST JOSEPH MI PERMIT #335

Small Businesses Working With Local Bankers

Duane Ramsey

Many small businesses depend on local community banks for their commercial banking and borrowing needs. In return, those community banks help small businesses to obtain capital to expand and create jobs.

“Small business is what we do. It’s our target market, our bread and butter, the reason we exist,” said Charlie Crone, executive vice president and chief revenue officer at the Bank of Ann Arbor, and a 37-year veteran of commercial banking in the local community.

“It’s a hands-on, face-to-face business. We try to get to know the business owner who knows the people at our bank who understand their business model,” Crone explained.

“We try very hard to always respond positively to meet their business banking needs. It’s sometimes difficult for the banking industry to meet, but we try hard to find a way to say yes,” he said.

The assessment of a bank should include knowledge of its banking products, your business, your customers and vendors. Small business owners should think about having personal chemistry with the people at their bank,” Crone added.

“Do people at the bank ask good questions and do they understand your business. Are they being creative to meet your needs? Can you meet face-to-face with them and have multiple ways to reach people at the bank? Do they respond to your questions quickly? That’s very important,” Crone explained.

“The depth of relationship, how many people you know at the bank from teller to CEO. It’s important to know the people at the bank especially the decision makers,” he added.

What’s the capacity of the institution and will it meet your needs? The financial health of the bank is also critical. Is it growing, profitable, well-capitalized, and sustainable?

“A bank has to be strong enough to sustain economic downturns,” said Crone. “Are they competitive but not necessarily the cheapest?”

Crone reported that a longtime retail business owner in downtown Ann Arbor recently moved their business to them for many of those reasons.

“A very successful commercial contractor in the community came from another institution and moved all their banking to us last year. We provided financing for an apartment complex the owners were investing in along with a line of credit,” Crone said.

Bank of Ann Arbor has several hundred small business clients in the Ann Arbor area, according to Crone. With its office in Plymouth, it also does business in western Wayne and southern Oakland County, he reported.

Bank of Ann Arbor has provided commercial banking services and loans to local small businesses over the past 20 years. Privately-owned, the bank has about 300 shareholders, about half of whom are directors and employees who live in the community, Crone said.

University Bank in Ann Arbor is another community bank that is committed to helping small businesses and non-profit organizations to develop and grow. The bank has extensive experience working with hundreds of nonprofits and can structure loans to meet their specialized needs.

University Bank provides commercial real estate loans, equipment loans, SBA loans and working capital lines of capital to small businesses in Washtenaw County.

“Our primary focus is to find ways to assist small businesses in Washtenaw County to grow and help them create jobs for local residents” said Benjamin Kramer, who was promoted to vice president of community banking in March of 2015.

Along with his past duties as chief lending officer, he also oversees the retail banking office in Ann Arbor. Kramer joined University Bank in 2011 and has proven his leadership to the lending sales team responsible for commercial and consumer lending products.

University Bank is a locally owned and managed community bank primarily serving the cities of Ann Arbor and Ypsilanti. The community banking operations focus on local businesses, minorities and non-profit organizations.

Local Small Businesses Seek Capital
Janice and Jerry Sigler were looking for a local bank that would be willing to talk to them about helping them open a new business in Ann Arbor last year. The couple was looking for a place to open an ice cream shop.

Their commercial real estate agent, Jim Chaconas of Colliers International, recommended they talk to Ann Arbor State Bank.

“We never expected to own the property. We had planned to lease. We found the property Jim Chaconas was leasing and inquired about buying it,” Janice said.

The property is located at West Liberty and First Streets in downtown Ann Arbor on the site of a former gas station.

“We didn’t think we could afford to do that but working with Phil (Weiss at Ann Arbor State Bank), it became apparent to us that this was the route to go,” Janice said.

“We were working with someone who had never been in business before,” said Weiss, vice president of commercial banking at Ann Arbor State Bank.

The Siglers needed capital to do the renovation construction required to convert the building into an ice cream making and serving business. Jerry is a CPA and was able to put together a sound business plan for the new business, according to Weiss.

Ann Arbor State Bank was willing to consider a start-up business because Janice and Jerry invested their own money in the project, according to Darrell Kinney, senior vice president of commercial banking at the bank.

“We had very qualified and easy-to-work-with borrowers in the Siglers,” Weiss said. “We got the bank loan approved and then applied for an SBA 504 (loan). There are a lot of nuances in the SBA program especially for a new business starting from scratch.”

“There were some environmental challenges with the site but we were able to work through them. They were going to be serving food out of a former gas station site,” said Weiss.

The bank was required to go through an SBA certified development corporation. In this case, it was Weiss’ former employer, the Michigan Certified Development Corp. Kinney noted that Weiss’ previous experience working with the SBA was a “key to getting the SBA loan.”

“Phil’s past experience with SBA 504 and 7(a)a loans gives us the inside track,” Kinney said.

Another key factor in getting the SBA 504 loan approved was that Janice and Jerry had purchased the property for their new business, showing their commitment to the venture, according to Weiss.

“Once we got everything set up, the SBA process was easy because it was all electronic,” Janice said.

The Siglers opened Blank Slate Creamery on July 6, 2014. One year later, the business is surpassing all of its sales projections by 40 to 50 percent, according to Janice.

Blank Slate Creamery increased its business by 20 percent during the Ann Arbor Art Fair this summer. It was extremely busy on Sunday, July 19, which was National Ice Cream Day, Janice reported.

Janice is the hands-on person running the business. Jerry, who says his wife is the owner, handles the accounting and financial end of the business.

They currently have four fulltime employees, two managers and two who make ice cream. They are making about 275 gallons a week and selling pretty close to that, according to Janice.

Blank Slate Creamery offers made-from-scratch artisan ice cream with wholesome ingredients. Janice said,” If you’re going to eat something for a treat, you might as well eat something that is wholesome and good for you.”

They usually have 20-24 flavors available at one time. The top seller is a chocolate-covered pretzel cone. They offer unusual flavors such as fresh basil, garden mint made from fresh mint, and green tea ice cream they can hardly keep it in stock for their

large Asian clientele. Janice reported that they worked with Ann Arbor State Bank to finance the purchase of an additional pasteurizer and cooler to expand production of ice cream made on-site. She said they planned to have the new equipment installed and operating in early August.

“One thing that sets that bank apart from others is it’s more of a partnership than a big brother,” Janice said.

“Their success is our success, too. It works both ways,” Kinney, said about working with small businesses.

Ann Arbor State Bank also participates in the Collateral Support and Loan Participation Programs offered by the Michigan Economic Development Corp.

The Collateral Support Program provides cash collateral when a business doesn’t have enough collateral to support a loan. The Loan Participation program purchases a portion of the bank’s loan with a grace period of up to 36 months to alleviate cash flow which is ideal for businesses projecting growth.

Government Loans Help Small Businesses
The U.S. Department of Agriculture (USDA) and Small Business Administration (SBA) loans are valuable assets for banks in terms of sharing risk and for the borrower in terms of gaining access to much-needed capital.

USDA loans are meant to develop or improve industries in rural areas and to create or retain jobs. To qualify for a USDA loan, the business must be located in a rural area with a population less than 50,000.

The SBA doesn’t make loans to businesses, local banks do. To be eligible for an SBA loan, local businesses must apply with approved lending banks in Michigan.

Twenty Ann Arbor area financial institutions wrote SBA loans for local businesses in fiscal year 2014 ending on September 30, 2014. The 57 SBA loans provided a total of $21.2 million to local small businesses in FY2104

Huntington National Bank wrote the most SBA loans with 17 totaling $839,575. Local community banks including Ann Arbor State Bank, Bank of Ann Arbor, Old National Bank (formerly United Bank & Trust) and University Bank wrote SBA loans for local clients in FY2014.

“SBA loan guarantees allow lenders to make loans they would not make through conventional underwriting. This, in turn, makes financing available to thousands of small businesses that otherwise would not have access to the capital they need to start, grow and create jobs,” stated Ann Marie Mehlum, associate administrator for the Office of Capital Access at the SBA.

The SBA guarantees repayment to the lending banks and financial institutions up to certain percentages. SBA approved banks specialize in SBA loans including 504 loans and 7(a) loans with a major amount of the loan guaranteed by the SBA.

The SBA 7(a) loans are the most popular and are often used to obtain working capital for new or existing businesses, business acquisition or expansion, and purchase of inventory, equipment or owner-occupied real estate. The SBA provides loan amounts from $50,000 up to $2 million to small and mid-sized businesses.

Local banks often finance the working capital and equipment needs of businesses by offering SBA revolving credit lines up to $5 million with maturities up to seven years. Bank credit lines are typically used to buy inventory, provide working capital needs or finance seasonal capital needs, according to the SBA.

SBA 504 commercial loans are long-term, fixed rate financing for land and improvements. These loans are a favored way to finance a building or long-term equipment acquisition of $500,000 to $5 million. Businesses can usually buy property with a lower down payment and repay the loan over terms as long as 20 years.

“If we consider that small businesses generate two out of three jobs and half of all Americans are employed by a small business, the significance of SBA loan guarantees is self-evident. Further, SBA key loan guarantee program 7(a) operates at zero subsidy, which means it doesn’t cost the American taxpayer. Last year alone, SBA supported more than $29 billion in lending to more than 47,000 small businesses,” stated Mehlum.

She spoke about the future of SBA lending at the Great Lakes Lenders Conference held July 23-24 at the Motor City Casino in downtown Detroit.

In its 17th year, the lenders conference is hosted by the SBA district offices of Cleveland and Columbus in Ohio, Indiana, Illinois and Michigan. It is considered the premier banking event in the Midwest, according to the SBA.

About 300 lenders were expected to attend the conference this year, according to the SBA. Phil Weiss of Ann Arbor State Bank, Sylvia Boesser of Old National Bank and four people from Northstar Bank in Ann Arbor were registered to attend that conference.

Read the full article at http://digitaleditions.walsworthprintgroup.com/article/Small+Businesses+Working+With+Local+Bankers/2231964/267391/article.html.

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