Bob Coleman: The Pulse of Small Business Lending
If you’ve ever wondered how banks make credit decisions or what metrics influence a loan commitment, then Bob Coleman is someone you should be following. An influential force in the lending community for nearly 30 years, Bob’s work is a staple for lender industry professionals and is one of the primary sources that banks turn to for information when making credit decisions. Bob’s book, Money, Money Everywhere But Not a Drop for Main Street addressed the pressure on small businesses in the wake of the 2008 financial crisis and provided actionable solutions for cash strapped entrepreneurs. Bob founded Coleman Publishing, known for their wildly popular industry newsletters, reports and more. The company also produces conferences, webinars, and online training videos. He is a nationally recognized expert on small business financing and is featured frequently on Fox Business News, NPR, and numerous other media outlets. He has been recognized in print media from the Wall Street Journal to Bloomberg and is a frequent speaker about small business lending in the United States and the EU. Bob earned his B.A. in Medieval History from the University of California at Santa Barbara and an M.B.A in Real Estate Finance from the University of Southern California. He is passionate about giving capital opportunities to Main street and rural American business. In this episode, Ed talks with Bob about what decisions small business entrepreneurs should be making to maximize their lending opportunities.
[01:28] Bob Coleman’s Introduction
[02:20] Welcome to Bob
[02:51] The Coleman Report overview
[05:11] Bob talks about how he manages and disseminates information
[05:51] Trends in the lending landscape
[06:58] Defining a small business
[08:36] Normal SBA vs. Niche lending
[10:17] Picking a banker
[12:10] Online lender database
[13:47] Bank Timelines—what takes so long?
[17:42] How to get clear and specific with your lender and improve your chances for approval
[20:17] Number one reason businesses fail
[23:28] Pay attention to your cash
[25:37] Small Business Development Center
[27:35] Finding the right lender
[29:36] Lender Match
[31:51] Bob’s final advice for immediate impact
Learn More From This Podcast
In 1993, Bob Coleman was a banker. During his time in that position, it became clear that there was a real need in the banking industry for comprehensive coverage about lending. This deficit inspired him to start his industry newsletter, which would eventually grow into the in-depth educational resources it is today. Even though the internet has made it possible to run an entire educational platform that includes webinars and downloadable content—Bob still releases his newsletter in the form of a daily email. He jokes that everyone loves a trainwreck, and that the “Fraud Friday” email remains a fan favorite.
Though Bob does create his own content, he says that much of his time is spent collating information from industry experts. According to him, putting everything into a digestible context is where the majority of his work is. This process of connecting and contextualizing information means that Bob has a strong picture of the overall landscape of the lending space. Lending looks much different today than it did ten years ago when the biggest problem was a supply issue. This climate meant that lenders simply weren’t making small business loans. Today, that trend has flipped, and Bob says there is a lot of supply with many lenders looking to get into the small business lending niche. The primary reason lenders want to get into small business loans is that they’re a profitable asset. In contrast, larger corporate entities are more susceptible to rate sensitivities and market trends. Small businesses are less impacted by those nuances. The result? A good borrowing climate for small businesses. The results have been good. Small businesses are breaking performance records and portfolios are strong as a result.
Riches in Niches
Lenders have jumped on the niches wagon and more and more are starting to focus on extremely narrow niches. Bob says that focusing on difficult spaces like Gas Stations and convenience stores that have all the complications that come along with selling gas, food, nicotine, and alcohol are smart niches for lenders to be in. The brilliance is that those lenders willing to invest in becoming experts on specific topics create a narrow, but rich flow of consumers. Lender niches range from gas stations to dentists and veterinarians. Bob says that the hardest part of getting financed is getting properly aligned with a lender who has an appetite for the type of transaction you are presenting. With baby boomers coming up on retirement and looking to sell their businesses, lenders are seeing a lot of opportunities.
Sizing Up Your Banker
Small business consumers sometimes feel like they’re going in with a bad hand when they are considering taking out a loan. Not only is it intimidating, but business owners are disadvantaged because it’s simply not something they do regularly. As in life, there are no shortcuts and Bob says that the only way through is the hard way. Ultimately, knocking on a lot of doors is the best way to find the right fit. One thing business owners can do is make sure they understand what kind of financing they’re really looking for. For instance, a hotel owner might try and pursue real estate financing when what they should be looking for is small business financing. It’s important to vet bankers and get a feel for their experience. While business owners are unlikely to get named case studies, they can make sure the bank has financed a loan with a similar profile. While there is no magic wand to finding the perfect fit, the Coleman Report has collated an online lender database that is niche-specific for their readers. The important thing is to research and vet for your niche.
What’s Taking So Long?
Loan timelines can get pushed out largely because underwriters have to craft industry-specific profiles for each entity connected to the loan. Being able to simply and concisely convey your company’s revenues for the lender is the best way to fast track the financing. Being clear on where the equity and down payment is coming from are more ways to make financing move smoothly and quickly. Ensuring that your company profile is clear and straightforward will ultimately help seal the deal with a loan.
Why Businesses Fail
The number one reason that businesses fail is simply a lack of cash. Whatever the reason is—whether it’s from poor management or dipping sales—the result is the same. The old fashioned advice is that “when you’re in a hole, stop digging.” Bob says it’s important for businesses to cover their bases and not put their head in the sand. When a company can’t pay their employees or taxes or other primary foundations of their business, it’s ultimately better to have hard conversations with business partners, spouses or employees than to hope those problems go away. All business owners must remain sharp and keep an eye on their money. In fact, one of the most common reasons that businesses get in trouble is from a long trusted employee quietly ripping the company off for years. Business owners don’t need to understand the intricacies of accounting, but they do need to be somewhat of a renaissance person and ensure there is money in the bank.
Use Free Tools
Bob says that the organization SCORE and Small Business Development Centers—which are regularly attached to local colleges—are amazing resources for entrepreneurs. Taking advantage of these centers to build a solid foundation is the best preparation for success. They offer a lot of free resources and typically have strong relationships with local lenders.
Connecting the Dots with SBDC
SBDC can’t process loans, but they can help businesses put proper documentation together to help the process of working with a lender. These centers are also very good at helping businesses decide what size loan is best suited for their business and can often make a recommendation for a lender who will be a good fit. SBDC is a way to create and build personal relationships, which lead to referrals.
Lender Match is a free program run through the SBA. Lender Match is an online database that matches business owners to lenders. Business owners can fill out some basic information that the software will then sort out and pass on to lenders who are the best match based on your business. Lenders then have the opportunity to reach out with an offer. The program is successful for both entrepreneurs and lenders.
Bob’s Advice for Immediate Impact
Think about where you want your business in five years—the world is constantly changing and will look different than it did when you started.
Amazon Proof your business. Do you have something that Amazon doesn’t know how to do?
Go Where the Money is. Credit Unions and community banks can be excellent sources of funding for small businesses. Additionally, organizations like Rotary Club and Elks Lodges are great networking opportunities.
If you want to connect with Bob email him at firstname.lastname@example.org