Panel: Low rates, available cash help fuel business growth

After several lean years, banks and financial institutions are opening their wallets to businesses looking for money to grow, and that's providing unique opportunities for companies. according to a panel of experts at the Daily Herald Business Ledger's Newsmakers Forum on banking and finance Thursday.

The panelists, speaking to about 100 suburban business leaders and entrepreneurs in attendance at the DoubleTree Hotel in Downers Grove, agreed the days of tight credit over the past four to five years are over. The cash available for businesses now, coupled with historic low interest rates, is making this year a perfect time to invest in, grow or sell a business.

"We've come a long way from the credit crisis of 2008-2009," said Chris Rudolph, managing director, commercial banking for First Bank & Trust.

"Right now the business cycle is very, very strong, A lot of that is done by the Fed manipulating interest rates and keeping a very accommodating stance," Rudolph added. "From our stance, we've probably had the best five-year run that we've ever experienced. The business-to-business aspect has been very strong."

He and the others noted, however, that lenders still will favor businesses that can show they are profitable and have the financial records to back that up.

"The bank isn't charging or making the money, you have to do it," said Trevor Morgan, president of Prairie Business Credit Inc. in Naperville. "You have to prove you can do it."

That could be an issue for an entrepreneur or startup business that is faced with the need for cash to handle sudden growth or an order beyond its capabilities, For those purposes, a business may want to look into an alternative method, such as small asset-based lenders, as a way to meet immediate working cash needs.

"Banks are looking for reasonably steady growth. Our profile is exactly the opposite," Morgan said of his company. "I want somebody who has a chance to grow by a factor of two to three to four times."

Nonetheless, he added, the number of banks in the Chicago area and Illinois, and the competition among them to lend money, makes it "a fantastic time to be doing business around Chicago."

The current climate is also providing a good time to sell or buy a business, according to Eric Lundstrom, managing director of Focus Capital Advisors in Downers Grove. Although Baby Boomer business owners are staying active with their businesses longer than previous generations, he said, they will eventually leave the business. But, he noted, Boomers are more likely to sell their business than pass it along to the next generation of the family.

"We're going to see more companies coming to market, and the number one driver for the buyer to pay the highest price for business is leverage," Lundstrom said. "If you can borrow most of the money to make that purchase price, your return on the equity dollars you put in is a lot higher."

For the seller, Lundstrom noted, it is important to assure the business is well run and has the financials to back it up.

"If you run your business clean and sharp with really good records, it will pay off," he said.

The other panelists reiterated the importance of keeping detailed financial records, and stressed the importance of maintaining a good relationship with the lending institution. Rudolph recommended setting up quarterly meetings to go over financial records to assure the ability to secure funds when needed.

Presenting sponsors for the Newsmakers Forum were First Bank & Trust, Focus Capital Advisors and Prairie Business Credit. Marketing partners were GOA Regional Business Association, Management Association of Illinois, MRA - The Management Association, Small Business Advocacy Council, Chamber 630, Lisle Chamber of Commerce and Naperville Area Chamber of Commerce.