5 minute read
LENDER SPOTLIGHT: Q&A with Chris Degenhardt
Ask Chris Degenhardt how long he has been in the field of commercial lending, and he says, “My entire career.” That’s more than 30 years. He got into the field right after he graduated from college in 1986, going on to work at a number of financial institutions. Eighteen months ago, Degenhardt brought all of that experience to Service Credit Union, taking a position as Senior Lender in the Business Services department. Aside from enjoying the variety of experiences the job offers (“It’s always something different”), Degenhardt gets great satisfaction from helping businesses achieve success (“Helping them meet their goals is really key”). We talked to him about what services his department provides for businesses that are ready to expand and what they should consider before they do.
When a business owner comes to you saying they want to expand, what is the first step?
We explore why you want to expand and whether it’s a good time to do it. Is there an increased demand for your products and services? Are your customers asking you about expansion, to be open longer, have more locations or offer more types of products? That's a good indicator that your customers are looking for you to expand. Also, are your finances indicating it’s time to expand? Are you making a profit on a monthly basis? Do you have a financial cushion if something comes up? Are you in a growing industry?
Then we talk about how we can help. Do you need additional capital? A line of credit? Loans for more equipment or vehicles? A bigger space or another location? That’s what we’re here for.
Explain the importance of a line of credit.
A line of credit is like a credit card for a business. It used when your money is tied up in receivables, when a sale is made but you don’t get the money until your customer pays 30, 60, 90 days down the road. It’s also used when your money is tied up in inventory. The line of credit gives you working capital to support day-today operations until the receivables are collected or until you sell the inventory. And then, when you have more cash, you can pay down the balance. A line of credit is especially important for seasonal businesses.
A small business might have a $10- $20,000 line of credit; a very large company might have hundreds of thousands or millions of dollars in lines of credit. They’re doing the same thing, using it to continue to grow — bigger businesses are just doing it on a larger scale.
Talk about how Service Credit Union also connects business owners to loans provided by the U.S. Small Business Administration (SBA).
The SBA is a government agency that helps with financing. Say, if a business owner approaches us and wants to buy a piece of commercial property, we would finance up to 75% of the price. With an SBA 504 loan in addition, that percentage can go to 90%. So, instead of the borrower having to kick in 25% to buy the property, they only have to come up with 10%.
Are there ways to reduce the risk of expanding?
Yes, do research. Find out what both national and local experts are saying about where your industry is going. But also talk to your customers. Are they optimistic or pessimistic? Are they going to continue to buy, or cut back on your products and services? Pay attention to your industry, pay attention to your customers.
What is the biggest mistake businesses make?
It’s not sticking to their knitting, not sticking to what they know. People start out in a business with what they know — with a certain background, knowledge base and level of experience — and they become good at doing something. Sticking with that tends to be the safest way to move forward, as opposed to going too far off in another direction in a product line or area that they don’t have that much experience in.
What industry is performing the best right now?
Commercial real estate is very strong. The developers we’re working with are pushing forward with projects. Even though interest rates have crept up in the last six months, they’re not high enough that it’s stopping them. Some are doing refinancing, taking money from the equity in their properties to put aside for future investments. They’re locking in that lower rate.
What is the advantage of working with a credit union to expand a business?
We offer all the same products and services as a bank, but because of our size, the approval process for getting a loan doesn’t have multiple layers, so we can turn things around quickly. Also, a member can reach out and talk to us anytime they need to. We don’t have an 800 number where they’re going to get lost, they have our cell phone number and email address. We’re easy to talk to.
And it’s a long-term relationship.
Right, we’re looking for a relationship, not just a one-off, not just a transaction. We want to be a business’ one-stop shop, providing their line of credit, their equipment and vehicle financing, their deposit accounts, their cash management. That way, they know that there’s one person, one location they can call to get what they need.
