Product Description

Imposing pillars, pretentious marble floors, stuffy boardrooms and stifling bureaucracy...ah banking. In the wake of the S&L fiasco, regulation came down hard on the profession integral to our national economy. Commercial lending ground to a halt in the early '90s and Arthur Miller could have penned a sequel known as Death of a Businessman.

Access to capital was forever changed by those events. Obtaining business loans in today's highly regulated environment requires special knowledge and skills previously unneeded.

Written by a banker, How To Obtain Business Loans is always humorous and frequently sarcastic. The author aims his wit at the funny (if it weren't so serious) manner in which banks study commercial credit applications. So, while you're being entertained, you'll garner the inside information required to get the business loans you need.

How To Obtain Business Loans is an education in the ways that banks are currently set up, how they operate in the prevailing environment, the way they look at you and how to get the most out of your relationship with them. Rephrased that's who you need to be talking to at the bank, what loans they are willing to do and under what conditions, what's important on your application for financing and how to get your loan approved.

The author has a special knack for making the industry's rules and regulations crystal clear. Blame is laid on a regulatory system which hurts the very individuals it is supposed to help - the small business people of this country. A group, by the way, that creates 80% of the jobs nationwide.

This book is not some macro-economic report on the current status of the economy. You'll hear what's actually happening in our financial institutions from a banker waste deep in regulation and bureaucracy. You'll come away with the knowledge of what really goes on in the boardroom, and how you must adjust to successfully obtain credit. You'll be getting the real story.

How To Obtain Business Loans is an expose like none ever written about the financial service industry. Its contents are highly controversial and thought provoking. In short, the book lets the public in on secrets bankers and government officials have kept close to those gray vests.

The details are given in short-story form, relating actual instances from the author's own experience as a bank officer. With that in mind (as you would expect) all the names and financial figures have been changed to protect the anonymity of the parties involved. Which is why the author was forced to use a pseudonym, so as not to call attention to the institutions that retained him. Readers should take special note that the occurrences/conditions recounted are indicative of all similar sized institutions. Which is to say regional sized banks where most of American business goes for financing.

Product Details

• Amazon Sales Rank: #3757766 in Books
• Published on: 1995-03
• Original language: English
• Number of items: 1
• Binding: Paperback

From the Back Cover
Addison Parker plays deep throat to the banking industry's Watergate

"Bankers and regulators would do well to reevaluate their current course based upon the look in the mirror this book provides." Banker's name withheld

"Rarely does one get the chance to see the analysis of a loan or application from the banker's side. This book provides key insights into why banks make some of the decisions they do, and what a company can do to make it easier to obtain financing in this age of increasing regulation." Stephen Kauffman, President-Divco Construction Corp.

"Very informative! A well written, easy to understand guide for small businesses." James P. Dellas, CEO-U.S. Capital & Development, Inc.

"An excellent and easily read reference on how we ended up where we are, and how to acquire credit in this new era of banking. I'm in the process of putting several of the book's methods to immediate use." Lynn A. Daugherty, CEO-Grove's Edge Building Company

"The Concord Coalition will not issue a statement on the book..." A nationwide grass roots movement to eliminate the deficit. Co-Chaired by senators Paul E. Tsongas and Warren B. Rudman

The link between current banking practices and the Federal Deficit is a well-kept and frightening secret!

About the Author
The author received a Bachelors degree with a double major in Management and Finance from a state university. In addition he obtained his Series 7 license from the Securities and Exchange Commission qualifying him as an investment counselor for both debt and equity instruments in the primary and secondary markets.

He is familiar with all phases of bank administration and has direct experience in branch operations, consumer lending, and residential loans. His primary focus, however, has been in the area of corporate finance and commercial real estate lending. Most recently, he oversaw the operation of a $60,000,000 a year residential department while simultaneously responsible for underwriting his institution's development loan requests.

Excerpt. © Reprinted by permission. All rights reserved.
Chapter 1: Why Banking Changed: I suppose it has always been part of a banker's job to remain highly visible within the community. Given that services have become all but completely homogenous, it's of paramount importance today. So tonight I'm attending yet another dinner function. The scheduled speaker is to elaborate on the city's zoning changes. A less than scintillating topic that will have most of the audience napping in no time. However, I won't be. I'll need to stay alert for the question and answer session. At which time, no matter the presentation content, the gathering will probably move into a little banker bashing. Happens a lot. It seems flat out amazing, so long as the discussion is remotely related to business, someone in the crowd will invariably bring up the lack of money being lent by banks. This always livens up the group. Instantly you'll hear testimony on requests rejected, proposals altered to the point of being ridiculous, and the time that it takes to get any answer at all. "What the blank are these bankers doing anyway?" is usually the emphatically asked question. Now being highly visible in the community means being a big red target. Boy, I can't wait to go tonight. Industry Transformation: Let's have a review of basic economics. When a business holds a monopolisticg position it can be relatively assured of enjoying good profit margins. Accordingly, there is little reason for management to take excessive risks in operation. In the event true competition arises and the business has to fight for its customer base, management will be forced to make more and more decisions that increase operating risk. They may lower the price of the product, pledge faster delivery, take on additional leverage to try and attain higher market share, etc. When this occurs, the firm's risk of bankruptcy rises. This is what happened in banking. Regulatory protection once allowed the banking system to operate as somewhat of a monopoly. There wasn't an institution on every street corner, and alternative short term investment vehicles didn't exist. Your local bank's cost of funds was quite controllable. At the same time, if you needed a loan they were very often the only game in town. As a result, net interest marginsg were high, most institutions returned their owners a nice profit, and insolvencies were almost nonexistent. But as AT&T found out, monopolies don't exist perpetually in our country. (Except for baseball.) Commercial paperg entered the scene and abruptly took away banks' bread-and-butter earning asset... short term loans to quality large firms. To worsen matters, money market fundsg followed soon after and swooped up a big percentage of shorter term deposits. What happened? Loan rates had to be dropped, and deposit rates had to be raised in order to retain customers. Margins contracted sharply. What next? Interest rate deregulation. Deposit rates were further bid up to gain market share. At the same time, other forms of lenders were entering the arena: leasing companies, insurance firms, finance companies, and brokers of private money. Margins disappeared. Every action demands an eQqual and opposite reaction. So, commercial loan volume had to be increased in order to meet budgets. As a result, banks made riskier and riskier credit extensions. As the appetite for loans skyrocketed, loan-to-deposit ratios expanded drastically. Ratios in the 95% range became more the norm and less the exception. With liabilities increasing substantially, and no additional equity being infused, institutions made themselves ripe for bankruptcy should vicissitudes in the economy take place. (Back to basic economics. Capitalist society = cyclical economy.) When the downturn came, insolvencies began to occur. Bad Loans: I've been employed by two quality regional size banks. Each had loans on the books that Michael Milken might have thought too risky an investment. (Too bad he wasn't on the board.) One memorable credit was a loan to Trafalgar Development. (Throughout this book the accounts given are genuine, but names have been changed; as have numbers, although they remain in proportion to actual figures.) Trafalgar had been able to obtain a $1.5 million dollar loan to construct an office facility. They were a British concern with no holdings in the United States. Likewise, the company's principal, Colin Scott, was a British subject with no assets stateside. This meant the loan was basically without recourse to company or individual in the event of any default. The reliance was solely upon the real estate. That in mind, you must be presuming the location of the building was outstanding, and that the majority of space was pre-leased prior to construction. Wrong and wrong. The site was located well south of the city. Although it fronted a main thoroughfare, it was in a sparsely developed area. Leases. Ah yes, that would've helped. Too bad by the time construction was completed there weren't any; the few pre-leases that existed having fallen out. So there she stood, 20,000 square feet of concrete and glass. A shell whose only tenant, after 4 years, was the leasing agent. The bank? Needless to say the estimated loan-to-value position had become something substantially different than that initially underwritten to. With the building generating no income, an updated appraisal yielded a value much less than originally estimated. (To say the least.) Value of facility as initially calculated:
20,000 SF @ $15.50 per $310,000

in gross rents
Less 10% vacancy $31,000

Effective gross income $279,000
Less 25% in expenses $69,750
Net operating income $209,250
Cappedg at 10% $2,092,500
(say $2.1 million)
Original LTV (Loan-to-Value) 71% Versus a valuation based upon an adjusted income stream, using more conservative rental rates and vacancy factors: 20,000 SF @ $12.00 per $240,000 Less 15% vacancy $36,000
Effective gross income $204,000
Less 25% in expenses $51,000
Net operating income $153,000
Capped at 10% $1,530,000
(say $1.5 million)
Adjusted LTV 100% Just like that, there's no equity in the collateral. This happened on a lot of real estate deals throughout the industry. Undertakings which really weren't feasible got done. The desire for volume was at such a premium, good sense didn't prevail during loan committee.

Customer Reviews

Understand the enemy. He's not as smart as you think.
Parker, a former banker, takes us throughthe incomprehensible logic of banking loans. Do the terms "dinosaur brains" or "ostrich management" have meaning to you? They will after you're done with this book.

The auther utilizes a genial, anecdotal writing style that leads you through the loan and approval process by retelling his personal experiences. His stories teach without being dry or scholarly. There are no lectures here, no dogma, and no sermonizing. The author genuinely wants us to understand the industry so we can succeed.

Parkers' message is clear. Banks are large, highly structured, highly regulated institutions that are unable to handle, or comprehend, the entrepreneural world that they make their living from. If half of what he writes is true I'm surprised his sanity lasted long enough for him to escape.

Please buy this book and read it. You'll either learn a lot, laugh a lot, or groan at the incomprehensibiltiy of this system. I did all three.

No Help
I bought the book because I was applying for and SBA loan, after reviewing with my husband and my partner we returned the book because we found it to be of very little help!

Carol