On Automatic Pilot Come Tax Time? After months of notifying your borrowers that it’s  time to provide their statements or tax returns for the prior year, statements for the year ending the prior December start arriving in your office in late October or November. With a sigh of relief you mark them in your tickler as “received” and advance the date for the next yearend statement, only to realize that the statements must be spread and analyzed and the loans risk rated.

Your team goes on automatic pilot, quickly opening up Ventures and checking off the boxes:  Management: 5 years: Check. Loan seasoned: 3 years. Check. Balance Sheet Ratios exceed peers: Check. Add a few comments. Ventures adds up the points: Presto! The loan has been risk rated. Next loan!!

Automatic Pilot: Missed Opportunity. Does this sound like you? If so, you’re not alone. At JRB, we think you’re leaving money on the table. Analyzing yearend statements can be a gold mine for your CDC, if you take the time to do it.

Mine the Gold in Your Accounts. Your customer base holds a treasure trove of opportunity. Check those Fixed Assets. Is equipment nearly fully depreciated? If so, your borrower might need to replace worn out or obsolete equipment. When was the last time your borrower had significant Capital Expenditures?  If it has been awhile it could be time to tell your customer about your 10-year, fully amortizing, fixed-rate equipment loan program. If your current loan was for real estate only, your customer may not know that a 504 can finance equipment too. When was the last time you mentioned that to your customer?

How about revenue trends? Every year your borrowers’ revenue has been growing. Are their locations large enough to accommodate the growth?  Could be your customers are talking to other lenders about expanding. Shouldn’t they be talking to you too?

Maybe your customers need working capital. Most CDCs don’t have a working capital loan product. But the TPLs on your 504 loans do. Work with the existing TPLs to advance a line of credit, or a loan for permanent working capital. If your customers need working capital, chances are they’re shopping. Other lenders might just offer working capital loans that also include prepaying your 504 loans. If that happens too often, you’ll see steady decline in your servicing income.

Reap Your Rewards. Marketing to existing clients is the easiest type of marketing. They already know who you are and what you do. And you know all about them. You invested a lot of time developing a relationship with each client. Like any relationship, you need to keep working at it to reap the best rewards

Richard Jeffrey
Associate, CDC/504 Programs