Learn Loan Essentials for Entrepreneurs from Mark Ritter

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03/18/2024

Show Notes:

✅ Exploring the maze of small business financing? 💡
✅ Tune in as Tyler Martin and lending expert Mark Ritter unravel the complexities! 🎙️
✅ Dive deep into the world of credit unions and effective borrowing strategies on Think Business with Tyler. 🌐
✅ Get the insider scoop on successful lending – avoid the pitfalls and secure your business’s future today! 🚀🏦

INTRODUCTION

In this episode, Mark will share with us the ins and outs of the lending climate, the influence of personal situations on loan approvals, and the intricacies of working with credit unions for small business owners and real estate investors. He’ll touch upon his experience steering a business lending program through the complexities of multiple ownership and the critical nature of customer satisfaction.

We’ll explore why hard money loans might not be the best option, the advantage of SBA loans for growing businesses, and why personal guarantees often come attached to the financial support you seek. Mark will also shed light on some signs of financial distress, including the risks involved when misusing funds, as we discuss a cautionary tale of a business owner who learned that lesson the hard way.

And if you think credit unions don’t cater to small businesses or are beyond your reach, Mark is here to bust those myths. We’ll discuss the role of QSOs in making business loans more efficient and accessible through credit unions, and how collaboration can lead to better funding options.

Finally, he’ll leave us with some sage advice: stick with your known skills and be cautious not to chase after the latest fads without adequate planning. Be sure you don’t miss his valuable insights tailored for the small business community.

Ready to empower your business acumen? Let’s get the conversation rolling. Stay tuned as we unlock the strategies for successful business financing with the knowledgeable Mark Ritter. And remember, if you’re looking for more information after the podcast, visit mbfs.org and connect with Mark on LinkedIn.

ABOUT MARK RITTER

Mark Ritter is a finance expert with keen insights into the dynamic nature of financial markets, especially post-pandemic. Seeing the transformation first-hand, Mark acknowledges the significant shift from the low interest environment that prevailed during the pandemic to a period where money has become decidedly more expensive.

As a realist who understands economic cycles, Mark believes that while interest rates are bound to fluctuate, they are poised to decline slightly within the year. However, he stresses a crucial factor often overlooked by many: the relationship with local financial institutions. Through his experience, he has recognized that a crucial aspect of navigating post-pandemic finance is understanding a bank’s liquidity.

Mark is well aware that numerous banks, over-leveraged from an era of cheap loans and heavy investments, might not openly communicate their lending status. His pragmatic approach includes advising people to have frank conversations with their bankers about their current capacity to lend. He points out that credit availability issues might not always be because of an individual’s creditworthiness—it could very well be an internal issue within the financial institution.

Mark is all about equipping people with the knowledge that it’s essential to ask the direct questions that can reveal a bank’s true lending stance. This awareness empowers individuals and businesses alike to make informed financial decisions in a landscape that is continually evolving.

QUOTES

1. Mark Ritter discussing the lending climate: “Right now, we’re in a period where money is more expensive, and you really have to understand what’s going on with the liquidity at your local financial institutions.”

2. On the importance of being prepared for loans: “Being prepared and having those financial plans in there before you need the money is so crucial because when you need the money, and you’re in a crisis, that’s not the time to figure out those plans.”

3. Mark Ritter on the role of Personal situations in loan approvals: “Your personal situation has this tremendous impact, and we’re really looking at your global cash flow and situation. We’re not just lending to the business anymore, we’re really looking at both the business and personal financials.”

4. His advice on using loans for business growth: “You want to use loans for expansion, for opportunities. You don’t want to use loans to survive; when you’re taking loans to keep the doors open, it’s really a downhill slide.”

5. Mark Ritter’s perspective on customer satisfaction and trust: “If you don’t have that customer satisfaction, and you don’t have that trust, none of the technical side really matters because nobody’s going to bring their business to you.”

FUN FACTS

1. Mark Ritter moved to rural Pennsylvania for an outdoor-oriented lifestyle, emphasizing his enjoyment of the surrounding wildlife and his remote work environment.

2. Ritter heads an organization that is uniquely owned by 13 credit unions, working closely with these institutions to support small business financing.

3. He recounted the cautionary tale of a business owner who used payroll taxes to fund a lavish lifestyle, which eventually led to significant financial stress and a heart attack.

LESSONS LEARNED FROM MARK RITTER


Navigating the Lending Landscape

Mark Ritter shares insights into the current lending climate, noting that borrowing costs have risen. He stresses the importance of understanding the liquidity of local financial institutions, as this impacts their ability to lend. By being prepared and having robust financial plans in place before seeking loans, potential borrowers can increase their chance of approval. The discussion serves as a guide for small business owners to navigate the complex lending ecosystem and the shifts in economic conditions.

The Role of Credit Unions
Mark Ritter demystifies common misconceptions about credit unions, debunking the idea that they don’t support small businesses or are difficult to access. He highlights how QSOs help credit unions effectively manage their business lending by providing services like underwriting support, which allows credit unions to fund more business loans and often collaborate on larger loan amounts.

Furthermore, understanding how to effectively leverage credit union resources can be a pivotal strategy to scale your business, offering a blend of personal service and financial flexibility.”

Smart Borrowing Strategies
In his conversation with Tyler, Mark emphasizes strategic borrowing, advising against using loans simply as a means for survival. He highlights the importance of planning for growth and being aware of business trends and events that could affect the need for financing. This lesson focuses on the risks of borrowing without a solid foundation and strategy, which could exacerbate a business’s existing problems.

Consider the benefits of having a CFO for small business, who can provide strategic financial advice and ensure that your borrowing aligns with long-term objectives.

Building Frugal Businesses
Mark Ritter speaks to the impact of lifestyle choices on business profitability, praising Amish businesses as examples of frugality and conservative money management. He suggests entrepreneurs focus on skills they know well rather than chasing the next big trend. His advice encompasses the concept that prudent financial practices and leveraging existing strengths often lead to greater long-term success in entrepreneurship.

Tyler also highlights the value of engaging with a business coach to navigate growth and scale efficiently, emphasizing smart financial and operational decisions.

KEY POINTS

1. Proper Financial Planning

Assess liquidity and prepare financial strategies before applying for loans to improve approval chances and repayment terms.

2. Customer Satisfaction Key

Prioritizing customer service transforms struggling businesses into successful ventures, directly impacting the company’s recovery and growth.

3. Global Cash Importance

Lenders evaluate both business and personal finances, so maintain healthy global cash flows to qualify for better loans.

4. Hard Money Costs

Hard money loans have higher rates, often overlooking personal situations, best for short-term needs, not long-term solutions.

5. Personal Guarantees Needed

Small business loans typically require personal guarantees, ensuring the borrower’s commitment and accountability in the lending process.

6. SBA Loan Advantages

For consistent growth, opt for SBA loans offering favorable financing, ideal rates, and terms to facilitate business expansion.

7. Avoid Desperation Loans

Loans shouldn’t be a last resort for survival; they can worsen financial issues if not part of a strategic plan.

8. Tax Payment Red Flags

Delayed tax payments, such as payroll taxes, signal financial distress, creating lender concerns and complicating loan approvals.

9. Lifestyle Impacts Profitability

Personal spending affects business funds—emulate the Amish focus on frugality and conservative financial management for success.

10. Trust in Specialization

Leverage existing skills over fads. Specialization breeds trust, ensuring the business remains resilient and successful in its niche.

LINKS

Mark Ritter’s Site

Linkedin

 

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