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Financial Education

Starting a New Business: How Can CNB Help?

April 22, 2019 | Return to Financial Education

By Ron Haber, 2nd Vice President - Commercial Loans

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Michele Bachmann is quoted as saying “Small business is the backbone of our economy. I'm for big business, too. But small business is where the jobs are generated.” As the economy slowly churns out of the “Great Recession” this has never been truer. 

County National Bank takes pride in being the local community bank. Not only do we tout the phrase, we show it in so many ways, one of which is supporting local small businesses as much as possible. We want our clients to fulfill their dream of running their own business, especially if it contributes to the economic strength and quality of life in our community. However, lending to a client who wishes to start a new business can be tough for CNB. According to the Small Business Administration (SBA), 33% of all new businesses fail within the first two years. Each loan we make is a risk and we have to look at how to reduce the risk.  So how does CNB remedy this when we have a client that wants to start up a new business?  Do we discourage it – absolutely not.  Do we look at ways to decline it – no.  We look at every angle to try to make the loan work. 

To help offset the higher risk of a startup business we sometimes work with the SBA. SBA was founded in 1953 by Congress as an offshoot of the Reconstruction Finance Corporation (RFC) created by President Hoover during the Great Depression. The function of the SBA is to “aid, counsel, assist and protect, insofar as is possible, the interest of small business concerns.”  The SBA will guarantee up to 80% of any loss a bank may incur should a small business with a loan not succeed.  To CNB this simply means our risk is significantly decreased if we partner with the SBA.

So how does one go about starting or growing a small business? When you come to County National Bank for a startup business loan, these are the things we look for:

  • Résumé: If you are a new business client to the bank we will want a résumé that tells of your qualification to run this type of business.

  • Type of Business: CNB would need an introduction to the type of business you would be looking to open. This would include, for example, the name of your business, what your business will produce or what service it may provide and what sets your business apart from other similar businesses.

  • Capital Investment: What has been put into the new small business as an investment of capital? This can be in the form of cash or equity such as real estate, an investment account (not an IRA or 401K), equipment or vehicles.

  • Business Plan: How do you see the business developing in year one, two, three and how are you reaching these goals. A viable business plan could include market analysis, operations strategy, organizational structure, an outline of who your customer base would be, and how you plan to retain or grow your customers.

  • Financial Projections: What are your sales, expense and net profit expectations for years 1, 2 and 3?  What will your balance sheet look like for the same time period?

  • Motivation: Why do you want to do this and what are the benefits to you in doing so?

  • Credit Enhancement (such as an SBA guaranty): After reviewing a business loan request, County National Bank could make the decision to request a guaranty from the SBA. If we receive the SBA guaranty, the risk for CNB to make the loan is reduced, which is good.  There are no direct loans through SBA. It takes a minimum of 3 weeks to obtain an approval from the SBA after they receive a request.   

If you have any questions about business loans, please call County National Bank at 888-322-1088 or stop into one of our branches. Our lenders and managers would be happy to answer your questions and help you through the process of seeking financing for a new business.