PERSONAL FINANCE
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Preparation can improve experience for business borrowers from the ohio bar association
W
hether you are starting or expanding your business, chances are you will need to ask a bank for financing. You may assume a bank will evaluate your business based purely on dollars and cents and your likelihood of repaying the loan, but a lending officer may also consider intangibles such as your community standing, reputation and overall benefit to the community. You can correctly assume that the lending officer and the bank want your business to succeed so you can repay the loan, but you should know that the bank (especially if it is a community bank) also has an interest in your business’s success because of its positive impact on the community. Before making an appointment with a loan officer, you should know what the bank is looking for and be prepared to provide the necessary information. INFORMATION You will need to provide the bank with the following: n two to three years of business tax returns. n two to three years of personal tax returns. n a current financial statement. n a year-to-date income statement and balance sheet on your business entity. n a history of your business and/or a business plan. If the business is a startup, then you will need to provide projections for the next three to five years and the basis for those projections. COLLATERAL Banks typically will seek to obtain sufficient collateral to secure commercial loan requests. To determine whether your business has the necessary collateral, the bank will likely use the following criteria: n If you are using commercial real estate for collateral, the bank will typically want to know that, based on the property’s appraised value minus any current mortgages, your business owns at least 20 to 25 percent of the interest in the property. n If you are using accounts receivable
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as collateral, then the bank will typically use the following formula: 100 percent of the receivable accounts, multiplied by the receivable collection rate, multiplied by 70 percent, minus any current liens against accounts receivable assets. n If you are using equipment and furniture as collateral, the bank will typically credit between 80 and 100 percent of a new purchase or 70 percent of the asset value after depreciation is figured and minus any current liens against the equipment or furniture. n If you are using cash assets, then the bank will typically consider 100 percent of the assets minus any cash asset liens. n If you are using marketable securities (such as stocks or bonds) as collateral, then the bank will typically consider 70 to 75 percent of the portfolio’s value and 65 to 70 percent of the mutual fund value, minus any current liens against your marketable securities.
10 OCTOBER/NOVEMBER 2021 METRO MONTHLY
ANALYSIS The bank will likely consider the following questions when deciding whether to grant your business a loan: n Is there sufficient collateral? n What is the personal credit history, the debt-to-income ratio and the liquidity of the business owners and/or any other guarantors of the loan? (Typically, banks look for a business to have no more than a 40 percent debt-to-income ratio.) n Does the business have sufficient cash flow to service the debt? To find out if your business has sufficient cash flow to cover a loan, you may wish to contact a lender, an accountant, or an attorney. About the authors – Paul E. Peltier is an attorney and director of wealth management for Champaign Bank based in Dublin. Timothy M. Oyster is a business banking officer for Champaign Bank. The article was updated by Jeffrey S. Rosenstiel, attorney and director of credit administration for Central Bank & Trust Co., and formerly a partner with the law firm of Frost Brown Todd LLC.
Medicare Check-Up Day information webinars
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he Ohio Senior Health Insurance Information Program is conducting free Medicare Check-up Day webinars around the 2022 Medicare open enrollment period, Oct. 15 to Dec. 7, to educate participants about Medicare basics, coverage options, and financial assistance programs. OSHIIP, a division of the Ohio Department of Insurance, helps Ohioans understand Medicare and determine the best coverage options for their healthcare needs and budget. Coverage and cost evaluation is imperative because Medicare plans can change from year to year. The webinars are on Mondays (register at www.insurance.ohio.gov): Oct. 4, 10 a.m. to 11 a.m. Oct. 12 (Tuesday), 2 p.m. to 3 p.m. Oct. 18, 10 a.m. to 11 a.m. Oct. 25, 2 p.m. to 3 p.m. Nov. 1, 10 a.m. to 11 a.m. Nov. 8, 2 p.m. to 3 p.m. Nov. 15, 10 a.m. to 11 a.m. Nov. 22, 2 p.m. to 3 p.m. Nov. 29, 10 a.m. to 11 a.m. During Medicare open enrollment, Ohioans can: n Determine if their existing coverage will continue to meet their health insurance needs. n Stay on Original Medicare and shop for a stand-alone Part D prescription drug plan. n Select a Medicare Advantage plan, which provides comprehensive health benefits, typically including prescription drug coverage. n Utilize certain financial assistance programs. Medicare 2022 plan information is available at www.medicare.gov. In addition to webinars, OSHIIP is holding on-site events across the state, which are subject to change. For a full outreach schedule, visit www.insurance.ohio.gov. OSHIIP staff is available Monday through Friday, 7:30 a.m. to 5 p.m. at 1-800-6861578 and OSHIIPmail@insurance.ohio. gov to provide assistance. Ohioans on Medicare can also call 1-800-MEDICARE (1-800-633-4227) 24-hours-a-day, seven-days-a-week for Medicare help.
