Bankers are feeling misunderstood. No longer, they claim, should they be shunned as the founder of last resort. After all, their rates are low; they don’t want controlling interest of your board, like many a VC; nor are you likely to meet them across the Christmas dinner table inquiring with feigned nonchalance how their investment in your startup is going.

         To help banish some of the myths and establish a few realities about approaching bank loan officers, Biz4NJ went straight to the source. In this first of a three-part series, we talked with several members from The New Jersey Bankers Association - all bank CEO’s. Their banks ranged in size and location across the state, but each assured us that his doors stood eagerly open to companies of all sizes, at all funding stages. Individually, they lay out the strategies and tips that will better your odds on securing needed funds at the best rates.

        After two decades in the field, Bill Moss founded Two River Bank in Middletown in 1999. By 2004, Moss’s thriving institution took over the Town Bank of Westfield, and today Two River boasts 10 locations throughout the state. Since he personally raised the capital for his bank, Moss is one of those rare financiers who has sat on both sides of the loan table. A community style bank, most of Two River’s commercial loans go to existing companies ranging between $1 million and $5 million, with some funding for large corporate expansions.

       “Basically, we rent money, and we merely have to make sure our customers can pay the rent,” says Moss. “We don’t sink our teeth into your assets or meddle into your daily managing, so we seek other ways to minimize our risk.”

* Alluring Startups. Moss readily admits that banks generally are not inclined to loan to startup companies. This said, he adds that his own bank funds scores of new businesses annually. From top down, he lists the four prime funding considerations as: accessible collateral; the entrepreneur’s experience in the industry; his personal overall financial history; and the business plan. While the venturist or angel might view this list as upside down, remember the goals are different. Banks are grooming a business for repayment; venturists are grooming it for sale. The owner remains the only one concerned with his company’s growth.

         The concept of a loan officer’s asking entrepreneurs to list their hidden treasure chests of collateral is an old and bitter joke. “But absence of liquid assets is not a deal breaker,” Moss insists. “We seek any viable assurance of probable repayment.” This can come in the form of a cosigned loan from a Small Business Development Center, SBIR/STTR, Veterans’ Administration, potential customers of the new product, or from a governmental contractual liaison firm, such as InSitech, Inc. State and regional economic development authorities, and their women/minorities departments also can aid in securing bank products.

          Moss’ placement of the entrepreneur’s experience before his personal finance comes simply because the business launcher probably has much more of the former than the latter. Experience shows the applicant as a skilled and practical dreamer, not just a wishful dreamer. When checking into personal finance, banks naturally favor an owner who has already taken much of the risk, e.g. by mortgaging his own house. However, Moss adds that he gets leery of an entrepreneur who leaves his personal cupboard too bare. If the company thrives, but the owner is personally strapped, the business teeters in jeopardy.

* In Your Satchel. It goes without saying that bankers smile more fondly on applicants toting a thorough and cogent business plan in their briefcase. But whether examining an expansion or startup, bank officers place a slightly different emphasis on your strategy than an angel or VC. “In the plan, we’re looking primarily for a candidate who has worked accurately through his cash flow projections,” says Moss. Ideally, the finance package will include several product agreements from a spectrum of potential customers. Letters of intent, stiffening client resolve make this income more probable and thus lessen the bank’s sense of risk.

          Another loan-winning aspect is the effectiveness of the management team’s time. If the owner or sales force can be shown to make a high number of contacts, resulting in a high percentage of interest, it gives proof that there is a solid client base ready to handle the new product. It also indicates that the company owners know their stuff and are headed in the right direction. Frequently a simple, statistical statement of sales calls and results can be added to the application, and backed up by a journal if necessary.

        The conditions of the industry have always been an important consideration, and increasingly this means keeping up with technological advancement. “We had a long time client who owned a print shop whom the industry had simply passed by,” recalls Moss. “He came in for an expansion that was totally unrealistic.”

          Because he was a long time client, Moss tried to guide the printer into a smaller, specialty niche, which has served as refuge for many former printers.

* The Right Bank. Two River’s offices are local, community banks which deal directly and personally with their clients. Some of the companies are dynamic, growing retailers who employ five bank products at a time, others are more solid and mature customers, requiring a single, renewing instrument that helps their business steadily expand. “Because we work with mostly small and mid-size firms,” says Moss “we give them plenty of time, hopefully a little guidance - and that leads to that famous term, ‘the banker-owner relationship.’” 

        It is not always a chummy partnership. For all his 25 years in banking Moss has scrutinized the character of his potential clients as thoroughly as their spreadsheets - and he suggests they do the same. It’s not worth dealing with the devil just because he offers the loan at a few fractions of a point lower.

         Despite all the television advertisements, not every bank seeks a relationship or dotes on personal service. Fleet/Bank of America or Wachovia officers are scarcely gong to call for coffee and exhaustively guide their mid-size client through his funding needs. On the other hand, this may not be what a company wants or requires. Larger banks are more likely impersonal, quick, and standardized in their product packaging. For larger or more established firms, who know exactly what they need with no hand holding, this speed with lower rates may be the ticket.

        Finally, as in any field, banks claim certain areas of expertise. Two River claims no long experience with high tech companies or medical practices, and they will often redirect applicants to neighboring banks that do.

* The Right Funds. “Probably the biggest mistake I see clients make is asking for the wrong bank instruments,” says Moss. “I cringe every time I see a business owner ask for an $800,000 loan to complete an $800,000 expansion.” Very frequently, only $200,000 is required to take the new product line into cash return, the remaining $600,000 can be handled with a line of credit.

         Moss recently had one client expanding into a larger building. He estimated it would take six months before the enlarged cash flow would catch up. They signed an agreement giving the owner two loan cycles (six months) in which he paid interest only, then the regular payments kicked in from then on.
        Banks have pre-set products, but these are not Procrustean beds on which the client is stretched or sliced to fit. “Before you even apply for a loan, come in and talk your plans over with a banker. Get some idea of what is possible,” says Moss. “It may be the most profitable half hour you ever spend.”


Bill Moss has worked in almost as many Garden State Banks as his own Two River has branches. A native of Rumsen, Moss earned a bachelors in business management in 1979 from St. Leo University in Florida. He later took a graduate degree from Stonier School of Banking.
Moss began his career in Mid-Atlantic Merchant Bank’s credit department. Obtaining a vice presidency, he then moved progressively through executive positions in Central Jersey Bank and Trust, National West, and Shrewsbury State Bank. Since founding Two River Bank in l999, he has served as its CEO.

Article Summary:
        New Jersey’s 176 banking institutions with 3,351 offices around the state are claiming to offer a new flexibility for commercial customers. In this first of a three part series, we invite bankers to demystify themselves. Giving straight, unvarnished answers, bank CEO’s tell us what they can provide - and what kinds of loan applicants entice them.