Capital Ideas: How Different Types of Funding Can Grow Business

Prominently visible on buildings around town are names that demonstrate the strength and depth of the financial sector here — serving a business community equally strong and varied. We connected with select members of that sector to present an overview of funding types and opportunity. Notes Ken Bauer, chief lending officer at OneAZ Credit Union, “In order to grow or improve a company, a business owner must have access to new talent to build a team, more space to appease a growing team or more equipment to support these operations. Business loans offer the ability for business owners to fund these investments, granting them the ability to grow and improve their business efforts.”

Loans

“Wells Fargo Commercial Banking provides a comprehensive suite of products and services to serve the diverse needs of clients with annual revenue typically above $10 million,” says Wells Fargo Arizona Commercial Banking Market executive Megan Ackaert, explaining that, with offices across the United States and in Canada, Commercial Banking delivers local coverage and specialized industry expertise to companies in a wide variety of industries and subsectors, as well as government and institutional clients and real estate investors. “We work with our clients to provide working capital lines of credit, real estate and equipment financing as well as commercial card programs. As one of the largest banks in the United States, we have the ability to grow with our clients and help solve needs throughout a business life cycle.”

Loan types that Ackaert calls out specifically are leasing new tech, asset-based lending and leasing equipment. Speaking of the first, she explains, “In the age of innovation, companies must constantly adopt new technologies to remain competitive. By reducing cash outlay and structuring financing for the latest technology as part of their operating budget instead of capital expenditures, businesses can preserve what they have while simultaneously staying ahead of the marketplace.” Utilizing their assets for an asset-based loan gives them increased borrowing capacity and greater flexibility when pursuing business objectives while preserving capital and preparing for a potential recession. “We have seen this as commodity prices continue to swing, companies are turning to asset-based type lending structures,” Ackaert says. And regarding equipment leasing, she notes that, with regulatory and social pressures mounting for companies to be more considerate of the environmental impacts of their businesses, it is critical that leaders procure, use and dispose of their assets, including equipment, in an environmentally friendly manner. “As this grows in importance to our customers, we are seeing clients lease their equipment — from data centers, laptops/computers, construction equipment, trailers and trucks. Leasing offers businesses tailored, flexible payment structures, and term options that allow for reuse, return or recycling.”

Noting that BMO Commercial Bank offers a wide range of lending opportunities to support business growth and transition needs, Heath Scheid, managing director at BMO Commercial Bank, spotlights the following as a few of the most popular. Working capital loans are funding options that are ideal for companies requiring coverage for their short-term operational needs, such as payroll or rent. “While working capital loans aren’t designed as long-term investments, they provide an excellent short-term benefit for companies that need to fund a gap between producing a product or service and receiving the proceeds for that product or service,” Scheid says, observing that manufacturing and professional services are industries that leverage them frequently. An acquisition loan applies to any business looking to either acquire another company or make a real estate purchase to expand geographically, and Scheid explains, “By financing a portion of those assets through a bank, companies can ensure adequate cash flow for day-to-day operations while still facilitating large-scale business growth.” BMO also finds equipment financing to be another popular loan type.

And a specialized loan type Scheid describes is an employee stock ownership plan. “This type of financing is less geared toward company growth and more appropriate for business leaders — usually in asset-light industries like professional services — looking for ownership transition strategies,” he says, explaining ESOP financing allows either an individual owner or a group of owners to have a bank front the capital to buy that person or group out of their company ownership on a full or partial basis. “As an example, a marketing agency CEO who’s looking to retire within the next decade might consider an ESOP to increase their liquidity and begin rolling out their business succession plan.”

Community banks and credit unions bring another perspective to the lending landscape.

“Gainey Business Bank specializes in financing the needs of small to medium-sized businesses domiciled within the state of Arizona, with our primary market being Scottsdale and the surrounding Phoenix metroplex,” says Mark J. Martinez, executive vice president and chief credit officer at GBB. The bank’s experienced lending personnel offer expertise in owner and non-owner occupied commercial real estate lending into all industry sectors, and it supports financing for initial construction, interim and permanent real estate financing needs. “GBB also has expertise in all aspects of revolving and term financing of working capital assets (accounts receivable and inventory) as well as traditional equipment financing,” he says, noting the bank has partner relationships through which it is able to provide for equipment leasing needs. Furthermore, GBB is able to deliver credit enhanced lending options including the SBA 7a and 504 loan programs — which Robert Blaney, district director of the U.S. Small Business Administration for the State of Arizona, goes into below — as well as those small business loan programs made available through the USDA B&I program.

OneAZ offers a diverse range of competitively priced loans and lines of credit to help local businesses achieve their goals. Loans offered by OneAZ include term loans for purchasing equipment and machinery; loans for inventory and accounts receivable financing; construction and development loans; short and long term commercial real estate mortgage loans; and business vehicle loans. OneAZ also offers a business rewards credit card.

“For reference, OneAZ’s term loans involve a business owner borrowing a lump sum of capital and repaying over time with interest,” explains Bauer, noting that most loans are designated for certain purposes, such as equipment and machinery, and are meant to support specific investments to bolster a business’s ability to maintain day-to-day functions or expand efforts. On the other hand, lines of credit offer a business owner access to a specific amount of funds that they can pull from as needed, and these owners are only required to pay interest on the money that is pulled. “Lines of credit are typically used for working capital, managing cash flow and unexpected expenses.

“Business loans are meant to bolster businesses of any size, stage or specialty. However, different types of loans are right for different types of companies,” Bauer continues. Explaining that Small Business Administration loans are best suited for small companies who need additional capital or need support with expansion initiatives and that might be newer or have less in terms of established credit or collateral, he notes that OneAZ also partners with the SBA to provide both 504 and 7(a) loans to small businesses that maintain and strengthen the Arizona economy. In fact, OneAZ announced the end of last month that it is enhancing its ability to serve small businesses by now originating and servicing SBA 7(a) loans entirely in-house.

SBA loans are typical commercial or business loans with an SBA guaranty, Blaney explains. General characteristics include longer terms and competitive interest rates. SBA reports that for every one dollar SBA guarantees in Arizona, about 30 cents go to new small businesses.

One loan program from the SBA is the 7(a) loan program. With loans up to $5 million, of which SBA guarantees 75%, it is promoted especially for small businesses and the money can be used for most business purposes. The applicant must be a for-profit business and meet the credit requirements of the individual lender. Loan maturities depend on the useful life of the assets being financed and the borrower’s ability to repay — with specific maximums of seven to 10 years for working capital, 10 to 25 years for machinery and equipment, and up to 25 years real property.

SBA also assists with microloans, which can go up to $50,000, although most are in the $3,000–$7,000. These are seen as a great source for small startups and people with less than perfect credit.

Another popular loan from SBA is the 504. These are long-term, fixed-asset financing for projects from $500,000 to $15 million. Most are for 25 years with fixed rates. These are offered by nonprofit certified development companies. The total project financing is a composite of 50% by a third-party lender, 40% by the 504 loan, and 10% (at least) by the borrower.

Community development financial institutions are yet another type of funding source. These can be banks, credit unions, loan funds (usually nonprofit) and venture capital.

“CPLC Prestamos is an award-winning CDFI committed to breaking down financial barriers and fostering equality through offering a range of loan products, business consulting services and investment opportunities,” explains Teresa Miranda, senior vice president. “We specialize in providing credit to small businesses operating in underserved markets and communities, particularly those facing challenges in qualifying for traditional bank loans. We are dedicated to supporting businesses led by Latinos, women, and other minority entrepreneurs, with a specific focus on those situated in low to moderate-income neighborhoods.”

CPLC Prestamos provides microloans up to $50,000, boasting competitive interest rates and a repayment period of five years. These micro-loans are essential for navigating business challenges or fueling expansion into new products and services. Strategic investment of these funds is pivotal for small business owners, influencing their success and helping them build a strong credit history. This, in turn, opens doors to potential larger loans in the future, facilitating the expansion of their businesses.

It also offers its Community Advantage Small Business Lending Company for amounts of $100,000 to $350,000 as part of the U.S. Small Business Administration‘s SBA CA-SBLC loan program. These loans are designed to assist small businesses in underserved markets, providing capital funding and business consulting support for credit management, growth, and job development. This versatile loan can be used for owner-occupied commercial real estate activities like purchasing, renovating, or expanding. Additionally, it serves various purposes such as working capital, equipment purchases, debt refinancing, and business acquisitions. While the typical loan term is up to 10 years, it is customized based on the specific use and expected useful life of the financed assets. This loan, backed by an SBA guarantee of up to 85%, offers affordability and competitive market interest rates.

A third type of loan CPLC Prestamos offers is a Small Business Loan. Available for up to $1 million, these loans range in a variety of sizes and are available to fund most business needs such as working capital or fixed assets purchase. Sometimes a business needs capital for revolving credit, or seasonal financing, or refinancing debt. Other times there is a need to buy furniture and equipment, real estate, or remodel the office to attract more customers.

A final loan type we discuss in this article comes through the State Small Business Credit Initiative, which was reauthorized and expanded by the American Rescue Plan Act of 2021. Originally established in 2010, it proved highly successful in increasing access to capital for traditionally underserved small businesses and entrepreneurs.

“Arizona has a suite of three approved SSBCI programs catalyzing private investment in Arizona small businesses,” says Matt Bolin, senior program manager for SSBCIs at the Arizona Commerce Authority. These are the Loan Guarantee Program, AVC Ignite and AVC Limited Partner.

The ACA’s loan guarantee program provides a 50% guarantee to partners offering term loans who independentlyunderwrite the loans and lend with private capital and whose mission and targeted customer base aligns with SSBCI program goals. “Additional lending institutions are anticipated, and our current partners are the following three CDFIs: Clearinghouse CDFI, Lendistry and Prestamos CDFI,” Bolin shares.

Explaining AVC Ignite, Bolin explains that, through the AZ Venture Co-Invest program, the Arizona Venture Development Corporation invests directly alongside qualified investor partners in early-stage companies to expand access to equity capital in Arizona.

The AVC Limited Partner program works through the AZ Multi-Fund Venture program, with AVC investing as a Limited Partner in qualified venture capital funds to catalyze private investment in Arizona companies. Says Bolin, “The ACA has contracted implementing entity Arizona Venture Development Corporation (AVC) to manage both venture capital programs from their inception.”

Additional specialty loans come from organizations like nonprofit Local First Arizona. Kimber Lanning, founder and CEO, describes a micro loan program it has run for the past eight years in Graham, Greenlee and Cochise counties. Those are small business loans up to $25,000. “I’m proud to say that through that lending we’ve done just over 20 loans,” she says, noting, “We have only one default. And we’ve created dozens of jobs. In a small town, that goes a long way.”

Lanning is also concerned about low-income businesses that commonly turn to predatory lenders and incur an average of 48% interest. Local First Arizona’s Spanish language accelerator program is designed for this business segment. “Their orientation to finance is that all debt is bad. So, they only go when there’s an emergency. And they don’t have checking accounts, they have no credit history, and they’re stuck. It’s our job to get them out of that.”

Local First Arizona recently developed the green loan fund, which it offers in Maricopa and Yavapai counties. “The green loan fund is for businesses looking to do retrofits or upgrade equipment to reduce their water or energy or waste. That’s also up to $25,000 [like the small business loans] but can be used to replace a series of HBATs or leaky pipes or investing in some way that enables the business to actualize a savings on a month-to-month basis,” Lanning explains. The fund is self-replenishing and does not interfere in the business’s cash flow; the businesses pay back the loan from the savings it realizes — and then continues to reap that benefit in its ongoing operations after the loan is paid back. Applicants must be willing to go through an energy audit that will determine their potential savings and therefore their ability to pay back to loan, and then attend a boot camp to help them think through all the different ways they could reduce their carbon impact.

Grants

There are grant programs that some businesses may be able to take advantage of. Two offered through the SBA are the Small Business Innovation Research and the Small Business Technology Transfer programs. Information from Blaney describes these as highly competitive programs that encourage domestic small businesses to engage in federal research and federal research and development with the potential for commercialization. These grants enable small businesses to explore their technological potential and provide the incentive to profit from its commercialization. It is a win-win in that including qualified small businesses in the nation’s R&D arena stimulates high-tech innovation while encouraging entrepreneurial spirit. A central element of the STTR program specifically is the partnership between small businesses and nonprofit research institutions.

The recently completed Arizona Child Care Infrastructure Grant program was part of the ongoing efforts of Local Initiatives Support Corporation. LISC is one the country’s largest community development organizations, helping forge vibrant, resilient communities across America. LISC Phoenix, one of the CDFI’s 38 local offices, was formed in 1992 and since its inception has collaborated with place-based organizations and our corporate, foundation and public partners to create an innovative approach to working with neighborhoods that face systemic challenges. LISC has filled an important gap in the early education and childcare landscape by providing capital, thought leadership, and technical resources centered on the physical environment. The aforementioned Child Care Infrastructure Grant program is a framework for how private- and public-sector partners can deploy funding quickly, effectively and, most importantly, equitably to childcare providers at scale.

The immediate effect of this program was to help childcare businesses grow. “Our ultimate goal with these childcare providers is to teach them some business skills,” says LISC executive director Terry Benelli, noting a huge need for childcare providers here in the state that is only going to grow exponentially this year. “If we can build up folks who are providing services right now and are certified or licensed, then we think there will be opportunities for them to grow their businesses. And if they’re operating their business in an efficient manner, childcare margins are super-slim, if we can help them learn the techniques and efficiencies around running their business, then they’re the best candidate to expand.” LISC also sees the technical assistance piece — teaching them business skills — as the clearest path to preparing businesses to potentially take on debt and grow through other business loans.

But LISC recognizes that helping childcare businesses has a ripple effect on strengthening other businesses — especially ones that require work shifts outside the hours of 8 to 5. CHIPS Act was the incentive money to get the semiconductor corporations here to the United States and stop offshoring that manufacturing. In fact, in the CHIPS Act there is a callout to those who actually receive the incentive dollars to address childcare.

Says Benelli, “This grant ended, but our goal now is to figure out additional programming. Our dollars at CDFIs are tied to banking’s responsibility to community reinvestment. There are special purpose credit programs. We have bankers at the table to help us think through this.

“There’s also opportunity for private sector dollars to come in and help us mitigate risk on any lending that we’re doing,” Benelli continues. “And also philanthropy coming in and helping with this. This is, for LISC, definitely an ongoing topic. We consider it part of infrastructure improvements. So, there will be lots more to come.”

Investment

Businesses may also be able to attract investment that will supply capital.

SBA’s small business investment company program seeks to stimulate and supplement the flow of private equity capital and long-term loan funds to small businesses. An SBIC is a type of privately owned investment company licensed by the SBA that supplies small companies with both equity and debt financing. SBA sees them as providing a viable alternative to venture capital firms for small enterprises in certain sectors seeking startup capital. SBA does not invest directly into small businesses; rather, it provides funding to qualified SBICs with expertise in targeted sectors or industries.

One of the venture capital firms that focuses on Phoenix is The Journey Venture Studio, although the minority entrepreneurs it chooses to work with aren’t necessarily from Phoenix to start with. “We are bringing the top talent here to the Valley, to fund them to build — hopefully — the next Unicorn startup,” says Mark Moeremans, managing director. The goal is that the ones that have success and land on the right business will stay in the Valley and build companies here. “We even anticipate that the ones who don’t land on a concept that gets selected still may choose to stay in the Valley. Really, it’s a big win for Arizona!”

Specifically, The Journey is looking for founders who have a connection to the healthcare topic of their choosing, whether that is academic, professional or lived experience that will give them unique insight. “We bet on founders with grit who have demonstrated the ability to overcome adversity and have demonstrated perseverance, coachability and ambitious drive,” Moeremans explains. 

PART II: More Than Money

“In today’s competitive commercial lending market, pricing structures, interest rates and loan terms can be very attractive. It’s easy to see why businesses might focus on loan terms when it comes to their long-term banking relationship. Yet borrowing is just one part of the equation when it comes to weighing how much value your financial services partner adds to your business,” Ackaert says.

Noting that it’s important to think beyond the loan fundamentals, Ackaert shares, “In more than 20 years working with companies in various industries, I’ve found that many businesses deserve more from their banks than can be found on a term sheet.”

One of these intangibles is deep industry expertise and market insight. In fact, Ackaert characterizes industry-based expertise as priceless and believes a business’s banking team should serve as a trusted advisor as well as lender. She suggests businesses evaluate often whether their bank has a full breadth of experience and capabilities in the markets and industries that are vital to their success. “Your banker should also have an understanding of capital allocation strategies suited for your company, while minimizing as much risk as possible,” she says. “Whether you’re considering expanding, shrinking or standing still, your bank’s advice should be tailored to your specific financial goals and objectives.”

The other intangible Ackaert cites is financial solutions for growth. “Reflecting on your growth goals, evaluate whether your financial services provider has the resources, solutions and innovation to get you there,” she says. For instance, a business may need treasury management services offering electronic workflow capabilities to manage cash flow and optimize working capital. Maybe foreign exchange services will help a company compete successfully and profitably in new global markets. Does the bank offer what the business needs to scale and grow, or does the business have to reach beyond its capabilities to access the products and services to help it succeed and grow financially? Says Ackaert, “It’s important to have frequent strategic planning and financial management conversations with your banker about shifting goals, priorities and market dynamics.”

Addressing intangibles from another perspective, Martinez shares, “Businesses that are most likely to benefit from a banking relationship with Gainey Business Bank are those that have limited internal human resources with expertise that goes beyond that in their own fields of endeavor.” He notes that large, multifaceted companies have internal human resources that provide for many of their informational needs — CFO’s, controllers, accounting staff, etc. with Ivy League educations — and points out many small to medium-sized businesses do not benefit from having internal resources such as these. “For them, having access to a banker who will sit down and fully assess and analyze their financial situation is critical to their success. A banker who will consultatively look at a company’s historical, current and projected balance sheets; profit and loss statements; receivables and payables agings; inventory schedules, etc.; and make specific solutions-based financial product and service recommendations is invaluable to a small business,” he says, explaining this consultative and personalized approach to a banking relationship can help these smaller businesses improve earnings, cash flow, debt service capacity, liquidity, and more.

In fact, Martinez believes a good business banker that take a personal interest in the individual business can make the difference between its success and failure. He shares as example Gainey’s recent experience when it was approached by a small business looking to refinance a large line of credit secured by its working capital assets (accounts receivable and inventory) after the large, super-regional financial institution it had been working with had provided a generic “in-the-box” solution to their needs. “Through a deep-dive, consultative approach, we went back with a solution that amortized the permanent working capital portion of their trading assets while establishing a borrowing-base-driven revolving line of credit structured on their remaining working capital assets. We also consulted with them on more effective management of accounts receivable. In the end, we significantly improved their cash flow and reduced their immediate borrowing need. We were able to give them access to more capital to finance their future growth plans.” It was a win for everyone involved, as Martinez relates, “We won the business and gained a mutually beneficial banking relationship.”

CPLC Prestamos takes its services even further. “In addition to offering loans, we also provide coaching services that offer clients valuable support in various areas, including accounting, human resources, marketing, website development, and more,” Miranda says. “This additional service acts as a crucial differentiator, creating a lasting impact on our clients and contributing significantly to their overall success.”

Part III: What Businesses Need to Know

Ackaert emphasizes the importance of a business understanding its bank’s approval processes and local decision-making capabilities. “Insist on meeting your credit approver(s), and then consider what works best for you, based on your company’s needs, business cycles and credit professionals supporting you,” she says. “As Arizona business leaders seek working capital and resources to grow, it is important to consider multiple critical factors beyond just interest rates when evaluating financing alternatives and banking partners to support your medium- and long-term success.”

She discusses the following three factors:

• Amortization and Tenor — Amortization and loan maturity are key negotiation points during the borrowing process. The additional flexibility and peace of mind that come with a longer maturity may be worth some pricing concession. Similarly, borrowers should focus on the amount and timing of required amortization payments, as these required payments will reduce cash flow available to fund other uses prior to maturity.
• Covenants and Availability — While a proposal with “rock‐bottom” interest rates may lower borrowing costs, overly restrictive financial or other covenants can meaningfully inhibit businesses’ ability to pursue their strategic objectives. Similarly, unfavorable availability formulas may leave businesses without enough capital to complete projects.
• Personal Guarantees — While financing proposals often require personal guarantees, well-capitalized, stable businesses may have the ability to negotiate to eliminate guarantees. “Though this may entail slightly higher interest rates, as a business owner, you gain peace of mind that your personal assets are not subject to contingent obligations.”

Blaney shares the “Tips from a Banker” that the Small Business Administration presents in the loan clinic it offers regularly:

• Be prepared,
• Know exactly how much you need and what it is for,
• Know your options,
• Proofread what you prepare,
• Learn from your mistakes,
• And, most critical, prepare a good loan proposal or business plan.

Part IV: COVID Aftereffects

Martinez points to the movement toward hybrid and remote employees as an example of one major change that has occurred since the pandemic. He notes that, while such a work accommodation became a necessity for many businesses to survive and continue to serve the needs of their clients during the pandemic period, many of those employees have been slow to come back into the traditional work environment. In fact, many of the workforce have outright refused to return to a traditional work environment, opting to remain remote, and “employers have been forced to relent to their demands to retain capable workers,” he observes. This is among the factors combining to create challenging commercial real estate markets, particularly in the commercial office sector, he says. “As a result, many banks are painting entire sectors with a broad brushed approach where they refuse to consider financing these types of properties. At GBB, we realize that every commercial real estate loan is unique. We will underwrite every property interest based upon its unique circumstances and characteristics.”

Bolin points out that, since COVID, the American Rescue Plan Act of 2021 reauthorized and amended the Small Business Jobs Act of 2010 to fund the State Small Business Credit Initiative as a response to the economic effects of the COVID-19 pandemic. “SSBCI strengthens state programs that support private financing to small businesses and business enterprises owned and controlled by socially and economically disadvantaged individuals.”

This is also the business segment CPLC Prestamos is focused on, and Miranda emphasizes that, since the onset of the COVID-19 pandemic, Prestamos has remained steadfast in its commitment to supporting the hardest-hit communities and their small businesses. She notes that, in collaboration with the SBA, Prestamos is actively working to strengthen the role of nonprofit, community-based lenders. “It’s crucial for borrowers and applicants to be aware that Prestamos is dedicated to ensuring that small businesses in low-income areas not only survive but also have the opportunity to grow and thrive. We continue to adapt to any challenges arising from the pandemic to provide the necessary assistance for businesses to navigate these uncertain times successfully,” she states.

Observing that, in the post-pandemic era, lenders want to know that business owners can survive and thrive in challenging times, Bauer explains, “So much has changed in the business and banking landscape since COVID and lenders want to feel confident that a business has plans to adapt to inflation, rising costs and supply chain challenges.” He notes the best way for businesses to build that trust is to have a robust relationship with their business banker. “Strengthening that partnership will pay off for both the business owner and their lending partner,” he says.

Ackaert points out that a business’s financial services needs change over time and observes that, usually, no single bank is the perfect fit for every business and industry. “Periodically evaluating the true value of your banking relationship just might be one of the most profitable business habits to adopt,” she says.

Part V: The Case for Community-Based

“The idea that all debt is bad is simply not accurate,” says Lanning, addressing an issue that she’s found plagues some minority-owned businesses in particular, causing them to avoid practices that could build a favorable credit history. “It could be an investment — you would flip it and make a profit on it very quickly, pay it back and use the profits to invest in your business.”

Using her business — a small record store — as example, she explains: “Let’s say the most popular band has a new album coming out, and I know that I need to have 100 copies. But I look in my checking account and I only have money for two. So, I could just order two, and then what would happen is the other 98 people who come in that day would be told, ‘We’re sold out.’” That would lead to a long-term effect, as those people would lose faith and confidence in Lanning’s store as a provider for new releases, and next time they would remember that and, for the next important new release, they would not even give her a try. “So, the alternative would be to have a line of credit where I could tap that line of credit — only for just a matter of days. To buy 100 of those records, I need $1,800 today, and I’ll sell them all and I’ll make that money back right away.”

But what Lanning experienced during the economic downturn in 2008 underscores the value of community-based institutions in the financial ecosystem.

“During the 2008 downturn, I had a line of credit that was totally current — never missed a payment, never had a problem, but just because of the financial fallout, they eliminated without warning my line of credit.” So, as the holiday season approached, she had no money to stock up. “As a result, my holiday sales were down 20% — not because my business wasn’t doing well, not because people weren’t shopping,” she relates.

“This is how you get the wrong impression when they say, ‘Sales are down.’ Sales might be down because businesses couldn’t access the capital they needed to stock up to meet the demand,” Lanning explains. “So, when small businesses start to fail, oftentimes it’s not because they don’t have the ingenuity, they don’t have the grit; it’s that they can’t get the capital to meet the demand when they need it.

“Big companies don’t have this problem. Big companies can access their capital because they’ve got the relationships, but the little guys get overlooked,” Lanning continues. Noting that we’re all interlinked in this economy, she points out that small businesses, too, are driving sales tax revenue.

Lanning points to the distribution issues that arose around the federal government’s efforts to provide funds to help businesses when COVID hit to underscore how important was for small businesses to have their account with a local bank. “After Round 1 in the Small Business Relief Aid, Arizona came in dead last for funds distributed. We got beat by a bunch of states that had more local banks and credit unions because they were able to access the funds and distribute it to their clients.” She notes that here in Arizona, while many of the big banks have deposits with small businesses, they don’t do small business lending. “So, businesses got caught in not knowing somebody at the bank and so they just got put in line. And then the money ran out while they were still waiting in line.”

For the second round of COVID relief funding, the federal government set aside a specific amount for community banks and credit unions. “That was a requirement, not a negotiable. As a result,” says Lanning, “you saw [credit unions and community banks] got the money they needed to serve their small business clients. And they did it. And so in Round 2, we came in 24th. All because of the push and pull of the 13 community banks that we have left and the credit unions.”

There was a lot of enduring truth in the famous line from “The Music Man”: “You gotta know the territory.” As Martinez explains, “Most business owners/entrepreneurs are experts in making money selling products and services in certain defined industry segments. That is what they do — and they are generally good at it. Most of these business owners, however, must rely on third parties for critically important legal, accounting and financial advice. Gainey Business Bank is a community independent financial institution whose expert bankers are relationship focused and provide personal, consultative advice to our clients.” His key point is, “We know every one of our business banking clients and engage them directly. Moreover, we make all our credit decisions locally. Our decision makers directly engage our clients. This is extremely important in a world where bank mergers and consolidations have created distant and impersonal banking relationships.” In fact, he notes, “We are, literally, a small business — just like our clients.” While offering the same technology-based solutions as many of the big banks, including a full scope of deposit and treasury management services, “We can relate very well to their needs, wants and desires and provide well positioned and structured financial solutions that are customized to their needs.”

Part VI: The Financial Fit

“Your financial services needs change over time,” observes Wells Fargo’s Ackaert. “Usually, no single bank is the perfect fit for every business and industry. Periodically evaluating the true value of your banking relationship just might be one of the most profitable business habits to adopt.”

Ackaert believes financing decisions should entail a holistic approach, considering all relevant factors. And she notes that, while borrowers should certainly seek to negotiate attractive interest rates, it is important business owners balance this with other important loan terms that can impact their ability to grow and execute their business plans.

“In addition, borrowers should seek a financial partner with robust capabilities and a proven commitment to supporting Arizona businesses over an extended period of time,” she continues. “Your bank should be committed — not just to providing capital at attractive rates, but also to helping you and your company succeed financially.”

BMO’s Scheid emphasizes, “Working with a finance professional is the best thing any Arizona business owner can do today to ensure they’re optimally navigating the lending environment and the rate migration and high prices we’ve seen over the last two years. Ultimately, lending decisions can have a major impact on long-term growth goals, and a professional can ensure those immediate decisions are going to align well with economic projections, their case-by-case needs and their vision for the future.”