Tip of the Week

Getting Back To Fundamentals

An old friend once said that “every binge leads to a hangover”.   Consumers and businesses have been “binging” on excessive spending and loose credit for years and guess what, it caught up with us.  Starting with the sub- prime mortgage crisis last summer and leading to unprecedented illiquidity in the SBA secondary markets currently – we have all witnessed and perhaps been a party to lack of discipline, and lack of respect for some fundamental credit practices.  And now we’re living through the “hangover” and it’s painful isn’t it?

So with the election now behind us, and a “long road ahead of us” as our leaders would say, what can we do, right now, to make a difference?  We would suggest a return to some basic, essential principals for success –some fundamentals for us in the lending industry and for our prospective borrowers.

For lenders, especially SBA lenders, here is a short list of fundamentals that we prescribe to our clients, day in and day out:

• People First. Attract, support and retain the right people for the right roles, doing the right things, at the right time.
• Integrity. There is no wiggle room here. Tell the truth, deal with bad news urgently. Be accountable and honest in everything.
• Prudent Policy. Dust off your SBA lending policy and if you don’t have one, create one. A good policy is concise and stands the test of time.
• Practical Procedures. Tactics drive effective execution. Clarify roles, hand-offs, and logical work flow in a detailed and well structured document that will be followed by all the parties to the loan process – consistently.
• Quality.
  • This is a service business – provide world class service. 
  • Credit must be respected – build and maintain an excellent loan portfolio.

For prospective borrowing customers, we have an opportunity and a responsibility to provide mentoring and support to our clients.  They too need to focus on fundamentals so that they can access credit responsibly:

• Operate (live) within your means. Balance your budget, maintain good personal credit, and address problems head on.
• Sharpen your plans. Be very clear on your vision, strategy and tactics. Does it all make sense? Understand your “sustainable, competitive advantage”. Back up the numbers with reasonable assumptions.
• Plan for the best and prepare for the worst. Build liquidity (cash is king). Leverage debt prudently, flexible structures are more important that loan pricing.
• Be nimble and humble. Be prepared to “move on a dime” to take advantage of the changing marketplace. Don’t be afraid to do “grunt work”. Check the ego at the door. Know what you don’t know.
• Best people and best practices equals best performance.

Thanks to those wise folks in our lives who have helped us build a foundation of essential principals, the fundamentals.   We take comfort in these confusing and tumultuous times that better days are ahead.  We’re grateful for the opportunity to be of service to many of you.  Please let us know what else we can do for you and your organization to “get back to the fundamentals”.

Take the right approach

Brian Burke and Karen McHugh

740 E. Campbell Road, Suite 900 | Richardson, TX 75081 | (214) 507-7710 | (214) 507-7720
kmchugh@sbaAccess.com | bburke@sbaAccess.com | www.sbaAccess.com