San Diego Business Journal

Truths and Myths about Today’s Lending Environment for Local Businesses

Advertorial: Small Business Banking & Finance Supplement Monday, September 10, 2012

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By James Horton, Senior Vice President, California Region Manager, AmericanWest Bank AmericanWest Bank is a business-focused community bank founded nearly 40 years ago. We are financially strong and well-positioned for the future. Visit us at any of our Southern California locations or online anytime at www.awBank.net

I’ve been a San Diego-area banker my entire career, and I’m passionate about helping local businesses achieve their financial goals. Because of that, when I think of the economic vitality of our region I immediately focus on the businesses – large and small. The products and services they create, promote, sell and service, as well as the thousands of people they employ, form the foundation of our local economy.

At AmericanWest Bank, we believe in business. Our focus is helping local businesses achieve their goals, knowing this has a role in positively impacting the local, state, and national economy.

Maybe it is because I am a banker that I view our region through a unique lens – I experience economic progress every day as our team works with local businesses to secure the financing they need as well as recommending modern financial solutions to leverage their current cash flow. Because of that interaction, I hear some business leaders still asking if the national economic challenges of recent years have impacted their ability to qualify for a loan or line of credit.

If you’re wondering the same thing, here are three important facts:

First, lender liquidity and capital. There absolutely are banks with available liquidity to deploy in the form of loans to their customers. Here at AmericanWest Bank, for example, our excellent capital ratios and strong liquidity position afford us the ability to be lending actively throughout Southern California. We’re on the street looking for qualified borrowers, targeting commercial and industrial loans, owner-occupied real estate and SBA financing. And on the personal lending side, that includes mortgages and home equity lines of credit.

Second, underwriting standards. Our commercial underwriting standards have remained unchanged, including key factors such as loan-to-value (LTV) and debt service coverage ratios among others. Of course I can speak only to AmericanWest and not for the industry as a whole, but I’m very encouraged by what I’m seeing at many banks here.

Don’t under estimate cash flow. It continues to be the single most important factor in loan underwriting. The time-tested adage of the “5 Cs of Credit” (Character, Capacity, Capital, Collateral and Conditions) is as relevant today as ever before when it comes to qualifying for that loan or line of credit.

Obviously our state economy was impacted – as was every state in the country – and that ripple effect impacted business here. Unfortunately, some borrowers who qualified for credit a few years ago now find themselves in uncharted territory: unable to meet those same underwriting criteria as a result of the economic pressures on their businesses. This can include things such as significant reduction in property values, decreased sales volumes and operating losses. If your business has experienced some of these, my best advice is: do not assume it impacts your ability to qualify for a loan. Instead, reach out to a trusted banker and talk about your specific situation.

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