Member FDIC 10/16/13 |
Status of Banks in Colorado
• Main Street Businesses and Community Banks Caught in a Sub-Prime Trap Caused by Wall Street
• Most are Now Healthy• Regulators and Public - Everything a Bank• Dodd-Frank – Solved Some Problems, but
Harms Customer Access to Credit
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Member FDIC 10/16/13 |
Status of Banks in Colorado
• Dodd-Frank - Mortgage and Other Rules – End of Judgment Banking?
• 40% Colorado Banks Self Identified – Not in Business Five Years
• Why you Should Care…
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Member FDIC 10/16/13 |
Is Your Banker Your Partner?
• A Partner Makes Strategic Decisions • A Partner Shares in Operational
Decisions• A Partner Equally Shares Risk• A Partner Equally Shares in Upside
Return• Partner’s Interests are Fully Aligned
Member FDIC 10/16/13 |
Your Banker is NOT Your Partner
• A Banker Advises on Your Strategy Only• A Banker may not Engage in Operational Decisions• A Banker Cannot Share in Risks – Banker Must be
Right 99.9% of Time – Loans Need Multiple Sources of Repayment
• A Banker not Share in Upside – Receives Fixed Interest whether you Return 5% or 50% ROI
• A Banker’s Interest do not Fully Align – Your Banker Wants you to Succeed, but First Obligation is to Shareholders and Depositors
Member FDIC 10/16/13 |
Prepare to Win
• Develop Your Full Skill Set – Technical, Financial, Managerial and Strategic
• Network – You Need Friends• Do Your Research• Build Your Business Plan• Develop Plan B, Plan C and…
Member FDIC 10/16/13 |
Prepare to Win
• Build a Key Support Team• Build Appropriate Financial Depth• Build Personal and Business Liquidity
– You will need it!• Be Realistic
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THE POWER OF LEVERAGE
Leverage Equity Loan Amount
Total Assets
Net Profits @ 10%
ROI New Equity
No Leverage
$100 $0 $100 $10 10% $110
50% Leverage
$100 $100 $200 $20 20% $220
75% Leverage
$100 $300 $400 $40 40% $440
90% Leverage
$100 $900 $1,000 $100 100% $1,100
Member FDIC 10/16/13 |
The Danger of LeverageLeverage Equity Loan
AmountTotal
AssetsNet
Return @ (10%)
ROI New Equity
No Leverage
$100 $0 $100 ($10) (10%) $90
50% Leverage
$100 $100 $200 ($20) (20%) $80
75% Leverage
$100 $300 $400 ($40) (40%) $60
90% Leverage
$100 $900 $1,000 ($100) (100%) ($0)
Member FDIC 10/16/13 |
Sustainable Growth – 10% Retained Earnings Who Owns Your Company
0
50100150
200250300
350400450
AssetsDebtEquity
Member FDIC 10/16/13 |
Dealing with Bankers - Advice
• You Have One Mission – Long-Term Profits
• Long-Term Profits Make all Other Goals Possible
• Be Realistic• Picking the Right Banker – It Matters!• Bank’s are Regulated Institutions• No News is Not Good News –
Communicate!
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Member FDIC 10/16/13 |
Dealing with Bankers - Advice
• When Win…Don’t be that Guy• Build Financial Depth and Liquidity• You and Your Banker Cannot
Outsmart the Market – Homebuilders…
• Don’t Chase Irrational Competitors• Build a Company that is Good in
Good Times and Great in Bad Times
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Member FDIC 10/16/13 |
Dealing with Bankers - Advice
• If Win, Don’t Assume it Makes You an Expert in Everything.
• Even if Your Banker Believes It!• “Play Above the Death Line” – Jim
Collins in “Great by Choice”• Know Your Competencies
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